- Kenya’s GDP grew by 5.6% in 2023, driven by a rebound in agricultural activities and strong performances in transportation, communication, and hospitality sectors.
- The manufacturing sector saw mixed results with modest growth in food production and significant increases in non-food manufacturing.
- Despite inflation remaining stable and financial indicators showing growth, the Nairobi Securities Exchange saw a decline, highlighting some challenges amid the overall economic recovery.
Kenya’s economy achieved a significant milestone in 2023, recording a robust Gross Domestic Product (GDP) growth of 5.6 percent, official data from the Kenya National Bureau of Statistics showed on Monday. This impressive growth rate, up from a revised 4.9 per cent in 2022, marks a notable recovery driven largely by the agricultural sector’s rebound and a strong performance across various industries.
The 2024 Economic Survey Report paints a comprehensive picture of the factors contributing to this resurgence, highlighting both the successes and challenges faced by the Kenyan economy across various sectors.
Agricultural sector: the backbone of Kenya’s economy
The agriculture sector, which had been contracting in previous years, surged back with a growth rate of 6.5 per cent in 2023, compared to a contraction of 1.5 per cent in 2022. This turnaround was primarily due to favourable weather conditions that prevailed throughout the year, enhancing crop and livestock production.
Key food crops such as maize, beans, and potatoes saw significant increases in production. Maize production, for instance, benefitted from expanded cultivation areas and improved weather conditions.
However, the performance of cash crops was mixed. While tea production rose to 570.3 thousand tonnes from 535.0 thousand tonnes in 2022, coffee production declined by 6.2 per cent to 48.7 thousand metric tonnes. Sugar cane production also faced a severe drop, plummeting by 36.9 per cent from 8.8 million metric tonnes in 2022 to 5.6 million metric tonnes in 2023.
The horticultural sector showed promising trends, with earnings from fresh exports rising from $1.1 billion (Kes146.1 billion) in 2022 to $1.11 billion (Kes147.2 billion) in 2023. Export volumes of fruits and vegetables increased significantly, though there was a notable decline in cut flower exports, which fell to 73.5 thousand tonnes from 198.7 thousand tonnes in 2022.
Manufacturing: slow but steady progress
The manufacturing sector experienced a modest growth of 2.0 per cent in 2023, slightly down from 2.6 per cent in 2022. Food manufacturing saw varied performance, with notable increases in dairy products (16.4 per cent) and preserved fruits and vegetables (11.6 per cent). However, sugar manufacturing declined sharply by 40.7 per cent.
Non-food manufacturing also registered positive growths, particularly in the production of leather and related products, which surged by 21.7 per cent, and plastic products, which grew by 16.2 per cent. The sector faced challenges such as a 1.8 per cent decline in cement production, reflecting broader issues in the construction industry.
Construction: Slower Yet Positive Growth
The construction sector grew by 3.0 per cent in 2023, down from 4.1 per cent in 2022. This slower growth was partly due to declines in cement consumption and the import volumes of key materials like iron and steel. Cement consumption decreased from 9,494.2 thousand tonnes in 2022 to 9,201.8 thousand tonnes in 2023.
Despite these challenges, the sector benefitted from increased government expenditure on infrastructure projects, particularly roads. Government spending on roads rose by 0.7 per cent to $1.35 billion (KSh179.5 billion). Additionally, the number of residential buildings completed by the State Department for Housing and Urban Development increased significantly, supporting overall sector growth.
Transportation and storage
The transportation and storage sector expanded by 6.2 per cent in 2023, up from 5.8 per cent in 2022. Key drivers included increased activities in rail, port, and air transportation. The Standard Gauge Railway (SGR) saw passenger numbers grow by 14.1 per cent, while freight tonnage increased by 7.3 per cent.
“Passenger and freight movements via Standard Gauge Railway (SGR) grew by 14.1 per cent and 7.3 per cent to 2,729 thousand passengers and 6,533.0 thousand tonnes, respectively, in 2023. Consequently, railway revenue improved in 2023, with SGR cargo generating Kes14,685 million, up by 7.3 per cent from the previous year,” the 2024 Economic Survey says in part.
Air transportation also experienced a boom, with total passenger traffic rising by 19.2 per cent to 12,205.8 thousand passengers. The Port of Mombasa handled 6.2 per cent more cargo in 2023, reflecting enhanced logistics and trade activities.
Information and communication: a digital surge
The information and communication sector grew by 9.3 per cent in 2023, slightly up from 9.0 per cent in 2022. This growth was driven by increased mobile money transfers and a rising demand for data-intensive services. Mobile money transactions grew marginally by 0.6 per cent to $60 million (Kes7.95 billion), while total bandwidth usage nearly doubled from 6.5 million Mbps in 2022 to 11.0 million Mbps in 2023.
The sector also saw a 13.2 per cent increase in the number of licensed internet service providers, highlighting the expanding digital infrastructure. Domestic call traffic grew by 13.4 per cent, and the value of ICT equipment imports rose by 11.0 per cent, indicating a robust demand for technology and communication services.
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Accommodation and Food Service: Tourism Rebounds
The accommodation and food service sector saw a remarkable growth of 33.6 per cent in 2023, up from 26.8 per cent in 2022. This growth was driven by a resurgence in tourism, spurred by events such as the Africa Climate Summit and the EU-Kenya Business Forum. Visitor arrivals at major airports increased by 25.6 per cent, and hotel bed-night occupancy rose significantly to 8.63 million.
The number of international conferences held in Kenya increased by 9.0 per cent, and the number of delegates attending these events surged by 50.7 per cent to over 34,800 last year. These factors collectively boosted demand for hospitality services and contributed to the sector’s strong performance.
Financial and insurance
The financial and insurance sector grew by 10.1 per cent in 2023, compared to 12.0 per cent in 2022. Total deposits in financial institutions increased by 19.9 per cent to just over $45.3 billion (Kes6 trillion), the 2024 Economic Survey notes. Domestic credit also saw a significant rise, growing from $47.5 billion (Kes6.3 trillion) in 2022 to $52.8 billion (Kes7,041.1 billion) in 2023.
Credit to the national government and the private sector both increased, with the latter growing by 13.5 per cent to $35.5 billion (Kes4.7 trillion). The insurance sub-sector also performed well, with net premiums from life and general insurance rising by 16.0 per cent and 7.7 per cent, respectively.
Macroeconomic Indicators: a mixed bag
While the overall economic growth was positive, some macroeconomic indicators presented mixed signals. The Central Bank Rate (CBR) was raised several times, ending the year at 12.50 per cent, up from 8.75 per cent in December 2022. Interbank rates and loan interest rates also increased, reflecting tighter monetary conditions.
Inflation remained steady at 7.7 per cent, while the Nairobi Securities Exchange (NSE) 20 share index declined from 1,676 points in December 2022 to 1,501 points in December 2023, indicating some investor caution. Additionally, the average annual retail price of light diesel rose significantly, impacting transportation costs and broader economic activities.
