How election jitters, terrorism slowed down the economy

By JACKSON OKOTH

jokoth@standardmedia.co.ke

NAIROBI, KENYA: Elections, poor rainfall and terrorism weighed heavily on business last year according to figures in the National Economic Survey released Tuesday.

The data shows that the economy grew by just 0.1 per cent last year to 4.7 per cent a very slight increase from the 4.6 per cent recorded in 2012.

Devolution and Planning Cabinet Secretary Anne Waiguru released the figures Tuesday, but there was some confusion after the Government, for the first time, failed to indicate by how much it expects the economy to grow in the next financial year.

It is suspected the omission is due to financial year.

It is suspected the omission is due to the Government’s ongoing review of the way in which it calculates economic growth.

The revised matrix for working out the growth takes effect in September when it is expected that new figures will be released to put Kenya at par with middle-income nations.

But even the economic growth projections for Kenya by the World Bank and the International Monetary Fund (IMF) were missed in 2013.

FOURTH QUARTER

Kenya’s growth was also well behind that of neighbouring Uganda  (5.6 per cent), Tanzania (7 per cent) and Rwanda (7.5 per cent).

The outcome contrasts with the rosy projections by a fired up Treasury last year.

“We had initially projected a growth of 5.6 per cent in 2013 but looking at the last three quarters we are now looking at the growth of about five or 5.1 per cent. But that means we must grow strongly in the fourth quarter,” Mr Justus Nyamunga, the Director at Treasury’s Economic Affairs Department, said in May last year.

Regardless of this, Kenya’s is still the largest economy in the East African Community, which also includes Burundi.

POOR RAINFALL

More ominous are fears that poor rainfall in most farming areas during the planting season, including in the North Rift region — regarded as Kenya’s grain basket — and terrorist attacks will hurt the economy again this year.

Agriculture was the worst hit sector last year, with farmers in the dairy, sugarcane, coffee, tea and horticultural sectors earning less from their produce.

Growth in the agricultural sector fell to 2.9 per cent from a revised growth of 4.2 per cent in 2012, partly due to inadequate rainfall received in some grain growing regions.

While tea output rose 17.1 per cent from 369,400 tonnes in 2012 to 432,400 tonnes last year, earnings from the domestic and international market have been on a decline.

Coffee production dropped 18.8 per cent from 49,000 tonnes in 2012 to 39,800 tonnes last year.

Production of maize also fell 2 per cent from 39.7 million bags in 2012 to 38.9 million bags last year, while wheat rose 19.5 per cent from 162.7 million tonnes to 194.5 million tonnes last year.

Rice production increased from 83,600 tonnes in 2012 to 90,500 tonnes last year. 

Production of fresh horticultural produce rose 3.9 per cent to 213,800 tonnes.

Much of the blame for Kenya’s economic slowdown is being put down to election jitters, rising insecurity and insufficient rainfall in the fourth quarter of 2013 that hit agriculture, the main turbine in its engine.

DEVOLUTION FEARS

Apart from wheat and rice, other cereals recorded significant declines in production.

 A fall in international prices and erratic weather affected earnings from coffee, tea and horticulture, pushing down Kenya’s economic performance last year.

“There was risk aversion in the first quarter as key parastatals and government agencies withheld spending during the transition to devolved system of governance,” said Waiguru.

Tourism suffered as international arrivals fell by 11.2 per cent from 1.7 million to 1.5 million with tourism earnings declining from Sh96 billion in 2012 to Sh94 billion last year.

WESTGATE ATTACK

“The tourism sector was badly affected by the various travel advisories that were issued by many source markets owing to security concerns,” said Waiguru.

Signs of trouble for Kenya’s economy emerged in the third quarter of last year (July-September) when increased cost of living and effects of the Westgate terrorist attack began to sink in.

The shilling also depreciated as the county imported more than it exported. During this quarter, the economy grew at 4.4 per cent, compared to 4.5 per cent in a similar period in 2012 with various sectors such as agriculture, hotels and restaurants registering subdued growth.

On average the economy expanded by 4.6 per cent during the nine months period (January-September 2013) compared with 4.4 per cent in 2012.