Kenya GDP growth ‘surprisingly strong’ in first quarter June 28, 2013 5:45 pm on.ft/125pJEL By Katrina Manson in Nairobi Kenya’s economy grew at an annual rate of 5.2 per cent in the first quarter of the year, compared with 3.9 per cent in the same period last year. The figures indicate that east Africa’s biggest economy has broken a tradition of weak growth in election years. Kenya’s National Bureau of Statistics said on Friday that good weather had boosted the tea, vegetables and flower sectors, crucial foreign exchange earners, in the $40bn economy. Razia Khan, head of Africa research at Standard Chartered Bank, said the results were “surprisingly strong. “I would have thought that elections would have a bigger impact on activity,” she said referring to the March presidential poll, won by Uhuru Kenyatta, son of the country’s founding president. Mr Kenyatta is indicted by the International Criminal Court for crimes against humanity, allegedly committed during the post-election violence five years ago, and is due to stand trial at The Hague in November. Historically, violence and uncertainty associated with Kenyan elections have sent annual growth down 200 basis points in election years. In 2008, after widespread violence when more than 1,100 were killed and some businesses ground to a halt, growth fell to 1.5 per cent from 7 per cent the year before. But this time round while tourists stayed away – hotels and restaurant saw business shrink 15.9 per cent for the quarter and air transport growth was muted – outside investors appeared undaunted by the elections, which passed off largely peacefully. The stock market is up more than 10 per cent since the start of the year. Some domestic businesses nevertheless “turned defensive” and foreign players delayed large investment decisions before the election, said independent analyst Aly-Khan Satchu. “[A] wait-and-see attitude adopted by producers and consumers in relation to the elections led to suppressed activities of manufacturing, hotels and restaurants and financial intermediation,” said the statistics bureau analysis. The International Monetary Fund predicts that growth will improve, reaching 5.5-6 per cent this year, compared with 4.7 per cent last year, and 6-6.5 per cent in 2014, according to fund resident representative Ragnar Gudmundsson. “We expect that the smooth political transition will translate into faster growth during the second half of the year, as investment plans which were on standby start materialising,” he said. Kenya’s economy still faces deep structural difficulties and growth is far shy of rates needed to transform it. The country is aiming for double-digit growth and hopes the completion of large-scale infrastructure projects will propel Kenya to middle-income status by 2030. “Kenya’s growth is significantly below potential for a country at its low level of development and is volatile relative [to] its peers,” noted rating agency Moody’s in analysis earlier in June. It cited “a chronic infrastructure deficit” as well as “limited economic diversification, a narrow export base and low per-capita income” plus vulnerability to outside factors such as weather shocks and oil price increases. A growing import bill and reduced exports saw the current account deficit widen 50 per cent on last year to $1.4bn for the quarter. Exports remain overwhelmingly reliant on fragile agricultural output rather than an underdeveloped manufacturing sector. -- Katrina Manson East Africa correspondent Financial Times
Posted on: Sat, 29 Jun 2013 21:46:54 +0000
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