Kenya: Growth softens to over one-year low in Q1
Economic growth came in at 5.6% year-on-year in the first quarter, decelerating from Q4 2018’s 6.0% and marking the lowest print since Q3 2017. According to Kenya’s Statistical Institute (KNBS), growth was held down by a near broad-based slowdown across sectors.
In the first quarter, although agricultural output shot up compared to a quarter prior (Q1: +5.3% year-on-year; Q4 2018: +3.9% yoy), delayed rains curbed production and weighed on agro-processing industries, thus leading to a slowdown in the manufacturing sector (Q1: +3.2% yoy; Q4 2018: +3.7% yoy). In addition, construction activity decelerated in the same period, although remained strong nonetheless, supported by the continued construction of the Standard Gauge Railway linking Kenya to Uganda and other public infrastructure projects (Q1: +5.6% yoy; Q4 2018: +7.3% yoy).
Meanwhile, the electricity and water supply sector lost stride amid a slowdown in output from geothermal and thermal sources (Q1: +6.1% yoy; Q4 2018: +8.7% yoy), while the transportation and storage sector decelerated to 6.7% in Q1 (Q4: +9.3% yoy) amid a fall in the availability of credit. Lastly, the wholesale and retail trade sector slowed to 5.3% from 6.5% in the previous quarter.
Growth is set to moderate this year, with persistent drought conditions weighing on the agricultural and electricity supply sectors. Meanwhile, the interest rate cap will likely continue constraining the activity of SMEs. That said, infrastructure spending should support a robust outturn overall.