Kenya: Growth stable in Q2 amid drought
Economic growth came in at 5.6% year-on-year in the second quarter, thus matching the first quarter outturn and remaining at an over one-year low according to Kenya’s Statistical Institute (KNBS). Despite drought conditions weighing on agriculture, the print was slightly above market expectations.
The second-quarter expansion was supported by an upbeat manufacturing sector (Q2: +4.2% year-on-year; Q1: +3.2% yoy) and buoyant construction activity, owing to the ongoing construction of the Standard Gauge Railway linking Kenya to Uganda and other public infrastructure projects (Q2: +7.2% yoy; Q1: +5.6% yoy). In addition, growth in the transport sector accelerated, bolstered by a pick-up in air and road freight transport services (Q2: +7.2% yoy; Q1: +6.7% yoy), while the wholesale trade sector recorded a healthy expansion (Q2: +5.8% yoy; Q1: +5.5% yoy).
On the downside, the all-important agricultural sector, which accounts for about 30% of the country’s total output, slowed in the second quarter (Q2: +4.1% yoy; Q1: +5.2% yoy), hampered by delayed rainfall.
Growth is expected to ease this year as erratic weather conditions weigh on agricultural output and, in turn, on household spending. Economic activity should edge up next year, supported by upbeat fixed investment as the government moves forward with its “Big Four Agenda” infrastructure projects. The sizeable fiscal deficit remains a concern, however.