Kenya: GDP growth slumps to over two-year low in Q1
June 30, 2020
GDP growth slowed to 4.9% year-on-year in the first quarter, down from 5.5% in the fourth quarter of last year, according to Kenya’s Statistical Institute (KNBS). Q1's reading marked the softest expansion since Q3 2017.
The first quarter’s deceleration largely reflected a contraction in the accommodation and restaurant sector (Q1:-9.3% year-on-year; Q4: +9.0% yoy), as travel restrictions and containment measures in March extinguished the tourism industry, and a marked slowdown in the transport and storage sector (Q1: +6.3% yoy; Q4:+9.2% yoy). Moreover, growth in the construction sector decelerated to 5.3% after increasing 5.7% in Q4. Meanwhile, growth in the all-important agricultural sector picked up pace (Q1: +4.9% yoy; Q4: + 4.0% yoy), as key crop-producing areas avoided a hit from locust swarms and were barely impacted by coastal flooding, while output in the manufacturing sector grew 2.9%, up from the previous quarter’s 2.3% expansion. Lastly, growth in the wholesale and retail trade sector clocked in at 6.4%, matching Q4’s result.
Looking ahead, the Covid-19 shock is set to dent growth significantly this year as containment measures hamper domestic activity, while travel restrictions and feeble global demand cripple the external sector. While fiscal stimulus should cushion the blow, risks are tilted to the downside, with the threat of a second locust invasion further clouding the outlook.
Author: Hanna Andersson, Economist