Kenya’s economy begins to recover in 1Q21: CBK

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Kenya’s economic indicators by sector for the first quarter of 2021 point to continued recovery from the adverse impact of the COVID-19 pandemic, as normalization of the domestic and global economy continues.

This is according to a finding by the Central Bank of Kenya which however warns that the services sector continues to bear the brunt of the pandemic, attributable to COVID-19 containment measures which disrupted travel and hospitality services during the quarter under review.

According to the Quarterly Economic Review for January – March 2021 released last week, growth of the agriculture sector is expected to remain strong, supported by increased production of key crops following favorable weather conditions experienced during the quarter.

In the horticulture sub-sector for instance, total exports of horticultural crops increased by 10.6 percent compared to the previous quarter, boosted by continued normalization of international demand.

The report adds that significant growth in exports realized in February outweighed the declines in January and March.

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“Compared to the same quarter of 2019, horticultural exports increased by 35.8 percent, supported by favourable weather conditions that led to increased production of horticultural crops,” the report states.

As far as coffee is concerned, sales of the commodity rose by 22.7 percent in the period January-February 2021 compared to the same period in 2020, attributed to increased international demand.

According to CBK, this was reflected in a significant increase in monthly sales in both months. As such, the average auction price per kilogram increased by 57.2 percent.

On the other hand, tea production declined by 10.3 percent in the period January-February 2021 compared to the same period in 2020, owing to dry weather conditions in tea-growing areas. According to the report, the average auction price per kilogram increased slightly by 1.6 percent.

Meanwhile, sugarcane deliveries increased by 27.5 percent in the period January-February 2021 compared to the same period in 2020. This is attributable to the increased production of sugarcane following favorable weather conditions.

Sugarcane deliveries increased by 27.5 percent in the period January-February 2021 compared to the same period in 2020/UNSPLASH

During the period under review, milk intake declined slightly by -0.8 percent in the period January-February 2021 compared to the same period in 2020.

“Reflective of increased sugarcane production, processed sugar output increased by 14.7 percent in the period January-February 2021 compared to the same period in 2020,” the report states.

The report had expected industrial activity to rebound during the quarter, reflected in the economic indicators in the construction, manufacturing, and electricity, and water sectors.

During the period, cement production remained strong, reflective of increased cement consumption. It increased by 17.3 percent in the period January February 2021 compared to the same period in 2020.

Cement consumption increased by 16.5 percent in the period January February 2021 compared to the same period in 2020, following increased activity in the sector supported by increased Government spending on infrastructure.

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Meanwhile, the value of building plans approved by the Nairobi City County Planning, Compliance, and Enforcement Department declined significantly by 64 percent in the period January-February 2021 compared to the same period in 2020, reflected in both residential and non-residential building plans.

The report also notes that production of galvanized sheets and assembled motor vehicles declined by 24.0 percent and 24.1 percent in January–February 2021 compared to the same period in 2020.

An increase was also noted in electricity generation, which rose by 1.1 percent in the period January-February 2021 compared to the same period in 2020, supported by increased generation of thermal and wind electricity by 66.3 percent and 30.4 percent, respectively.

Consumption of electricity increased by 1.7 percent, as the continued normalization of economic activity led to increased demand for electricity.

Service Industry

In the services industry, leading indicators point to continued recovery during the quarter. However, growth is expected to remain low due to the poor performance of key sectors.

During the period under review, overall tourist arrivals declined by 57.6 percent in the first quarter of 2021 compared to a similar quarter of 2020, marking an improvement compared to the last three quarters of 2020, even as the tourism sector continues to recover from the adverse effects of the COVID-19 pandemic.

According to the report, the increase was reflected in both Jomo Kenyatta International Airport in Nairobi, and Moi International Airport in Mombasa.

“However, when compared to the same quarter of 2020, tourist arrivals remained low, and declined by 57.6 percent,” the report reads.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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