Kenya: Slowing Momentum as GDP growth eases in Q4 2022
Growth lost momentum in the fourth quarter, with GDP expanding by 3.8% year on year (Q3: +4.3% yoy). This brought overall growth for 2022 to 4.8%, down from a revised 7.6% in 2021. The deceleration was due to the weakening of a post-pandemic base effect and the negative impact of adverse weather conditions on the agricultural sector.
The agricultural sector shrank across all four quarters of 2022, contracting by 0.9% year on year in the fourth quarter (Q3: -1.3% yoy). Additionally, transport activity slowed in the period (Q4: +3.2% yoy; Q3: +4.8% yoy) and the construction sector also decelerated (Q4: +2.4% yoy; Q3: +3.5% yoy). While growth in the retail and wholesale trade sector moderated to 2.7% in Q4 from 3.6% in Q3, growth in the manufacturing sector remained unchanged from the prior quarter, with the sector expanding by 1.8% in Q4.
In seasonally adjusted quarter-on-quarter terms, GDP growth accelerated to 1.9%, up from the 0.9% expansion clocked in Q3. The result marked the strongest print since Q1 2022.
Economic growth is expected to remain stable in Q1 2023 although, there are some downside risks. On the consumer side, elevated inflation likely negatively affected private spending, while the ongoing depreciation of the shilling, the scarcity of dollars, widespread social unrest and persistent drought likely had a negative impact on both consumption and private investment.