- The economy recorded an average growth of 5.6 percent in the period between January to September 2022
- The Country’s Q3’ 2022 Gross Domestic Product (GDP) hit 4.7 percent.
- The growth was largely driven by the non-agricultural sectors
The Kenyan economy recorded an average growth of 5.6 percent in the period between January to September 2022 according to the latest report by Cytonn Investments.
The annual markets report indicates that the country’s third quarter Q3 Gross Domestic Product (GDP) hit 4.7 percent, adding to the 5.2 percent and 6.8 percent growth recorded in Q2 and Q1 respectively.
The average GDP growth of 5.6 percent marked a decline from the 7.7 percent average growth recorded in a similar period in 2021.
“The growth in Q3 was largely driven by the non-agricultural sectors, with accommodation and food, wholesale and retail trade, professional administrative and support, and finance and insurance sectors recording growths of 22.9 percent, 9.1 percent, 8.7 percent, and 5.3 percent, respectively,” the report states.
As the reports states, the growths in these sectors were supported by continued post COVID-19 economy recovery due to lifting of travel restrictions and ease in cross border transactions.
“However, the sectoral growths remained subdued due to uncertainties of the electioneering period and the adverse macroeconomic conditions in the country. Notably, the agricultural sector recorded a 0.6 percent contraction in Q3, compared to a corresponding expansion of 0.6 percent growth in Q3 2021 but an improvement from preceding contractions of 2.1 percent and 0.7 percent recorded in Q2 2022 and Q1, respectively,” the report explains.
The contraction during the quarters is mainly attributable to unfavorable weather conditions witnessed during the period, as well as increased costs of agricultural inputs such as fertilizer.
In 2022, the Kenyan economy is projected to grow at an average of 5.1 percent, lower than the 7.5 percent growth recorded in 2021.
The report blames the slower growth to a deteriorated business environment for majority of the year brought about by the uncertainties preceding the August 2022 general elections and elevated inflationary pressures driven by the high global fuel prices and the pre-existing supply chain constraints worsened by the Russia-Ukraine conflict.
“Notably, the unfavorable weather conditions experienced during the period under review has subdued agricultural production, with the sector being the largest contributor to Kenya’s GDP,” the report explains.
Sub-Saharan Africa Region Review
Kenya is ahead of its peers in Sub-Saharan Africa (SSA), as the region’s economic growth is projected to hit 3.3 percent in 2022 according to the World Bank, lower than the International Monetary Fund projections of 3.6 percent.
The projected region’s growth was revised downwards from the initial growth forecast of 3.6 percent and 3.8 percent in April 2022 by the World Bank and the IMF, respectively.
The lenders attribute the decline in the region’s economic growth to elevated inflationary pressures emanating from the spill over effects of the Russian Invasion to Ukraine which have led to increased fuel and food prices in the global markets given that majority of the SSA countries are net importers, coupled with adverse weather conditions that have undermined agricultural productivity in the region,
Pre-existing supply chain constraints have been worsened by disruptions arising from increasing lock downs to curb the spread of COVID-19 in China which is the region’s largest trading partner.
Moreover, rising risk of debt distress in the region is expected to weigh down on the region’s growth, and notably, countries like Ghana and Zambia have initiated forms of public debt restructuring during the year due to unsustainable debt levels,
Hiked interest rates in advanced economies such as the United States of America (USA) has also increased capital outflows in the region further fueling the economic decline in the SSA.