Kenya registers second worst economic growth in five years

Devolution and Planning Cabinet Secretary Anne Waiguru and Kenya National Bureau of Statistics Chairman Terry Ryan during the launch of 2015 Economic Survey at KICC. [Photo: Beverlyne Musili/Standard]

The economy grew by 5.3 per cent last year, a dip from the 5.7 per cent recorded in 2013, after the country took a hit from a decline in tourism earnings and a sluggish manufacturing sector.

This is expected to have negative bearings on the Government’s ambitious plan to raise spending by 25 per cent to Sh2.17 trillion in the next financial year. Already, the taxman is struggling to meet revenue targets from the country’s jewel sectors of agriculture, manufacturing and tourism, whose growth is pointing south.

Data released by the Kenya National Bureau of Statistics (KNBS) in its Economic Survey 2015 confirmed predictions of a slowdown, caused in part by a drop in the number of tourists visiting Kenya and a slump in output linked to the manufacturing sector. Neighbouring countries Tanzania and Rwanda grew faster than Kenya, posting 7.2 per cent and 6.0 per cent growth rates respectively.

The output in the country’s real sector, which is concerned with producing goods and services, slowed down from 5.6 per cent in 2013 to 3.4 per cent last year, with the modern sector creating 30,000 less jobs.

Further, the number of international visitor arrivals dropped 11.1 per cent from 1.5 million to 1.3 million, and with this, tourism earnings dropped 7.3 per cent from Sh94 billion to Sh87.1 billion

The dip in economic growth has been worsened by a rise in the cost of living. The statistics released yesterday show that the cost of living grew from 5.7 per cent to 6.9 per cent in 2014. This means that Kenyans used more money to buy the same quantity of goods and services than they did a year earlier.

Jobs created

According to the survey, the growth from the demand side was driven mainly by an increase in private consumption and rapid growth in capital investment.

From the supply side, the major drivers of the economy were agriculture, forestry and fishing, construction, wholesale and retail trade, education and finance, and insurance. However, the accommodation and food services sector contracted for the second year in a row.

The number of persons employed outside small-scale agriculture and pastoralist activities rose from 13.5 million to 14.3 million. The economy gave rise to 799,700 new jobs, representing a 5.9 per cent growth. However, the modern sector generated about 27,900 less jobs than it did a year earlier. The report says new jobs created in the modern or information age sector declined from 134,200 to 106,300 in 2014.

“This deceleration was mainly due to the decreased activities in the agricultural sector and reduced absorption of employees in the counties,” the report notes. The informal sector had the largest share of employment, accounting for 82.7 per cent of total jobs in the country.

In the energy sector, the total quantity of imported petroleum products grew by 11.7 per cent to 4.4 million metric tonnes, while customers connected under the rural electrification programme expanded by 16.5 per cent to 528,552.

And in the education sector, the number of educational institutions grew by 3.2 per cent from 77,197 in 2013 to 79,641 in 2014. However, enrolment in primary schools remained almost flat, growing by just 1 per cent from 9.9 million children in 2013 to 10 million in 2014. University enrolment grew at a much faster rate of 22.8 per cent. This saw the number of students in universities rise from 361,379 in 2013 to 443,783 in 2014.

Malaria and pneumonia continued to be major causes of death, accounting for 11.6 per cent and 10.9 per cent of all reported deaths respectively. Malaria and respiratory diseases accounted for 54.2 per cent of all illnesses.

There were 40 new health institutions established in the country in the year under review, bringing the total number of health facilities to 9,959. Further, the number of registered medical personnel increased 8 per cent from 112,576 in 2013 to 121,578 in 2014.

The Nairobi Securities Exchange (NSE) continued the good run that began mid-2013, though at a slower pace, with the number of shares traded increased 7.4 per cent to 8.1 billion.

The balance of trade, however, worsened by 18.7 per cent from a deficit of Sh911 billion in 2013 to 1.08 trillion in 2014 after Kenya’s appetite for imports grew.

Growth rates

On matters governance, the number of people reported to have committed crimes declined 3.7 per cent to 78,877 in 2014, while the number of crime cases reported to the police declined by 3.4 per cent to 69,376. Cases handled by the anti-corruption commission increased 19.4 per cent from 3,355 to 4,006.

The growth figures of 5.3 per cent are within Government projections, which had been put at between 5.3 and 5.5 per cent, after a downward revision from an initial 5.8 per cent last year.

The agriculture, manufacturing, real estate, transport and storage sectors remain the key drivers of Kenya’s economic engine, accounting for over half of the value of the country’s output.

In the year under review, the value of agriculture grew from Sh795 billion to Sh822.5 billion, while the building and construction sector continued to enjoy double-digit growth, expanding by 13.1 per cent.

The transport and storage sector grew 13.7 per cent from Sh768.3 billion to Sh873.3 billion, while the ICT sector expanded by 13.4 per cent in 2014 from 12.3 per cent in 2013.

The Economic Survey report provides details on the state of the country’s economy and highlights the economic performance and key social and governance statistics over a period of five years, with emphasis on the last two years. The publication provides necessary evidence in support of the progress made by the country in helping Kenyans access Government services.

In addition, the report informs budgeting, planning, monitoring and policy formulation. The data used to compile the report is collected through administrative records, statistical surveys and censuses.

KNBS has been producing the Economic Survey report since 1960.