Economy slumps as drought hurts key sectors

Kenya’s economy slowed down to a five-year low in the second quarter as drought took a toll on key sectors, the statistics office said Friday.

News of the slowed growth came as business leaders warned that the long-drawn-out political contest playing out in the country would continue crippling business.

The Kenya National Bureau of Statistics (KNBS) said growth slowed to five percent in the second quarter of 2017, down from 6.3 per cent in the same period last year.

It blamed the slowdown on drought, which impacted on the agriculture sector’s performance.

RAINS
Agriculture is a major source of employment and the country’s largest sector, accounting for 25 percent of GDP and roughly 50 percent of export revenue.

Tea and coffee rank among Kenya’s top exports.

According to KNBS, growth in the agriculture sector decelerated to 1.4 percent during the quarter from 7.1 percent in the corresponding quarter of 2016.

“The substantial slowdown was occasioned by insufficient long rains experienced during the period under review that affected most food crops,” KNBS said.

“This led to a notable slowdown in the manufacture of food as agro-processing was negatively affected by a constrained supply of food products.”

INFLATION
The manufacturing sector’s growth slowed down to 2.3 percent compared to a growth of 5.3 percent in a similar quarter in 2016.

A prolonged drought early this year affected food production, leading to a sharp rise in inflation.

“The average inflation rate increased more than two-fold from 5.36 percent in the second quarter of 2016 to 10.80 percent in the review quarter,” KNBS said.

Global economists had earlier projected that the economy would grow at the slowest pace this year on reduced agricultural production and a prolonged electoral process.

DROUGHT
The KNBS data covers the first half of the year (up to June), compared to the first half of last year.

As such, the potential impact of the heightened political activity in the country is not very apparent.

However, this is the first time the effect of the drought experienced early this year on economic growth is apparent.

Uncertainty about the repeat presidential election has clouded the outlook for East Africa’s biggest economy, with growth already slowing down.

“As it is now, the political activities have crippled business activities. We hope the election will be concluded on October 26 so that we can resume our business activities,” Kenya National Chamber of Commerce and Industry chairman Kiprono Kittony said.

ELECTIONS
The economy generally takes a dip every five years as political campaigns take centre stage and business people hold back investments as they await the outcome of the polls.

The Central Bank of Kenya recently said the increasingly favourable weather for agriculture and sustained public investment in infrastructure development will help cushion the economy against the knocks of prolonged electioneering.

The KNBS said inflation fell to 7.06 percent year-on-year in September, from 8.04 percent a month earlier, pushed by a fall in some food prices.

The Kenya Meteorological Department has projected good rains in the main food basket areas for the rest of the year.

Many businesses have adopted a wait-and-see attitude.

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