Politics and credit squeeze out third quarter GDP

Police officers and the public engage at Kondele in Kisumu after the youth barricaded Kisumu-Kibos road on August11,2017.  (Photo: Denish Ochieng/ Standard)

The economy performed the worst in five years, growing at 4.4 per cent in the third quarter of this year compared to 5.6 per cent registered in a similar period last year.

The last time the growth slowed down to such levels was in the third quarter of 2012 when the country recorded a 4.4 per cent growth.

Kenya National Bureau of Statistics (KNBS) Director General Collins Omondi said the charged political environment coupled with effects of adverse weather slowed down the economy.

“The period under review registered the slowest growth since the fourth quarter of 2013 mainly due to suppressed performance in key sectors of the economy,” Omondi said.

Financial services sector suffered the most, shrinking from a 7.1 per cent in third quarter of 2016 to 2.4 per cent in the period under review.

The sector has been starved of credit after the rate capping law was implemented. This is despite lower lending rates which declined to an average of 13.67 per cent in the third quarter of 2017 from 16.54 per cent during a similar quarter in 2016.

KNBS said the decelerated growth was mainly on account of constrained uptake of domestic credit that resulted in reduced growth from 15.3 per cent in the third quarter of 2016 to 5.2 per cent in the quarter under review.

Agriculture was undercut by a further collapse in the coffee industry which was once Kenya’s leading forex exchange earner.

The volume of coffee exports declined by 13.8 per cent from 10,900 tonnes in the third quarter of 2016 to 9,400 tonnes in the same quarter of 2017 which saw the performance of the Agriculture, Forestry and Fishing sector slow to 3.1 per cent compared to 3.8 per cent in a similar quarter of 2016.

In manufacturing sector, government subsidies buoyed the milling business but did little to save the sector which slowed to 2.1 per cent compared to 4.4 per cent registered in the same of quarter last year.

The rest of the sector slumped, especially with higher cost of electricity as drought limited hydropower (which declined 34.9 per cent) forcing electricity generation to rely on expensive thermal energy.

Electricity and water supply sector recorded decelerated growth of 4.8 per cent compared to a growth of 5.4 per in 2016 on the substantial increase (67.6 per cent) in the generation of electricity using thermal sources that constrains value addition due to its high cost.

End of the infrastructure boom spelled doom for the construction sector which expanded by 4.9 per cent compared to a growth of 7.8 per cent.

Cement consumption decreased by 13.1 per cent, from 1.621 million tonnes to 1.41 million tonnes which has seen Athi River Mining and Bamburi Cement issue profit warnings, while East African Portland Cement remains in the red.


The slowed growth is further explained by 66.1 and 37.9 per cent decline in the volume of imports of iron, steel products and cement respectively in the period under review.

In the hotel sector, growth in the politically charged months of July, August and September reduced from 13.5 per cent in the same period last year to 7.3 per cent, after posting remarkable performance over the last one and half years.

Accommodation and food service activities reduced from 13.5 per cent to 7.3 per cent after posting good performance over the last one and half years.

Growth was also recorded in professional, administration and support services and real estate activities.


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