Kenya recorded an accelerated growth in Gross Domestic Product (GDP) of 10.1% compared to a contraction of 4.7% in the same quarter of 2020.
According to the latest statistical report by the Kenya National Bureau of Statistics (KNBS), Kenya’s economic growth declined to 0.7% in Q1, 2021 compared to 4.4% in Q1, 2020, mainly as a result of the effects of the pandemic on the economy.
During the second quarter of 2021, the country’s accelerated growth rate was driven by rebounds in most economic activities from significant contractions in Q2, 2020. The growth was also as a result of the easing of COVID-19 containment measures that facilitated the gradual resumption of economic activity.
Some of the sectors that supported overall growth in Kenya’s economy in the second quarter included Manufacturing (9.6%), Education (67.6%), Transportation and Storage (16.9%), Information and Communication (25.2%) and Other Services Activities (20.2%).
GDP Sectoral Analysis
Agricultural Sector
There was a slowdown in performance of Kenya’s agriculture, forestry and fishing activities in the first and second quarters of 2021. The sector is estimated to have contracted by 0.9 per cent in the second quarter of 2021 compared to a growth of 4.9 per cent in the corresponding quarter of 2020.
The sector’s performance was cushioned from a steeper slump by a notable increase in milk production, horticultural exports and production of sugarcane. The volume of milk intake by processors increased by 37.9 per cent to stand at 208.5 million litres in the second quarter of 2021.
Cane deliveries increased from 1,666 thousand metric tonnes in the second quarter of 2021 to 1,907 thousand metric tonnes in the review period.
At the same time, the volume of vegetables, cut flowers and fruit exports rose by 58.1 per cent, 55.2 per cent and 23.5 per cent, respectively, in the second quarter of 2021.
The performance of Kenya’s agricultural sector was further aggravated by a significant decline in tea production from 143,037 metric tonnes in the second quarter of 2020 to 133,090 metric tonnes in the corresponding quarter of 2021.
Manufacturing sector
The manufacturing sector’s real GDP grew by 9.6 per cent in the second quarter of 2021 compared to a contraction of 4.7 per cent in the same period of 2020.
The performance of Kenya’s construction sector was slower in the second quarter of 2021 compared to the same quarter in 2020. The sector recorded a growth of 6.5 per cent in the second quarter of 2021 compared to an 8.2 per cent growth in the second quarter of 2020.
Cement consumption increased by 29.3 per cent to 2.079 million metric tonnes in the second quarter of 2021. Credit advanced to the construction sector declined by 1.7 per cent to KSh 359.1 billion in the second quarter of 2021.
The electricity and Water Supply sector grew by 5.2 per cent in the second quarter of 2021 compared to a 4.7 per cent contraction in the second quarter of 2020.
Electricity and Water Supply
Total electricity generated increased from 2,634.9 million kilowatt-hours in the second quarter of 2020 to 2,975.8 million kilowatt-hours in the quarter under review.
Transportation and Storage
Kenya’s Transportation and Storage sector reported a growth of 16.9 per cent in the second quarter of 2021 compared to a contraction of 16.8 per cent in the corresponding quarter of 2020.
The accelerated growth was a result of the lifting of restrictions on domestic and international movement which was in place in the second quarter of 2020.
Freight movement through Standard Gauge Railway (SGR) increased by 25.9 per cent to stand at 1,326 thousand metric tonnes in the second quarter of 2021.Similarly, passenger transport through SGR increased from 6,363 passengers in the second quarter of 2020 to 304,445 passengers in the second quarter of 2021.
Accommodation and Food
Accommodation and Food Service activities recorded a gradual rebound from a consistent contraction reported in the last three quarters of 2020. The sector grew by 9.1 per cent in the second quarter of 2021 compared to a 56.8 per cent contraction in the second quarter of 2020.
This sector was the most hit by the COVID-19 pandemic in 2020. One of the measures put in place to combat the pandemic was a cessation of movement and in some regions. This culminated into a significant decline in the number of visitor arrivals by over 99 per cent, scaling down of hotel operations and in some cases closure of some facilities in the second quarter of 2020.
However, this improved tremendously in the review period after relaxation of most of the restrictions.
Financial Services
Kenya’s Financial and insurance Sector accelerated in the second quarter of 2021 to grow by 9.9 per cent compared to a growth of 4.4 per cent in the same period of 2020.
The Central Bank Rate (CBR) remained at 7.00 per cent during the review period. The lending rate and interbank rates increased from 11.89 per cent and 3.27 per cent in June 2020 to 12.02 per cent and 4.63 per cent in June 2021 respectively. On the contrary, average deposit rates and savings rates decreased from 6.86 per cent and 4.15 per cent in June 2020 to 6.37 per cent to 2.55 per cent in June 2021.
The Kenyan Shilling depreciated against all major international trading currencies except the Japanese Yen in the second quarter of 2021 compared to the same quarter of 2020.
On average, the Kenyan Shilling ceded ground against the Pound Sterling, Euro and the US Dollar by 13.9 per cent,10.8 per cent and 1.2 per cent, respectively, during the second quarter.
Inflation
Inflation increased from an average of 5.31 per cent in the second quarter of 2020 to 5.98 per cent in the corresponding quarter of 2020 mainly on account of a significant surge in prices of agricultural produce due to unfavourable weather conditions.
Kenyan Wall Street
