Kenya’s economic system grew by 4% in Q3 2024, marking its slowest enlargement in 4 years. This slowdown was recorded regardless of a stronger shilling and easing inflation. The 4% development fee is a pointy decline from the 6% recorded in Q3 2023, in accordance with the Kenya Nationwide Bureau of Statistics (KNBS).
KNBS highlighted that the majority sectors contracted through the evaluation interval, underscoring the robust macroeconomic atmosphere. The development and mining sectors, particularly, noticed the steepest declines, reflecting decreased investor confidence in large-scale tasks. This comes regardless of President William Ruto’s emphasis on building, particularly his inexpensive housing program, designed to deal with unemployment and the nation’s housing deficit.
Key sectors see contraction
The development sector was hit laborious as banks tightened credit score in response to rising rates of interest and elevated financial dangers, making funding for brand new tasks scarce. Loans to building firms dropped by 13.6%, totaling $998.6 million (KES 129.2 billion) in Q3.
The federal government additionally scaled again new highway tasks, additional curbing demand for key building supplies like cement, metal, and bitumen.
In mining, the anticipated enhance from lifting the 2023 moratorium has been undercut by delays in licensing. In consequence, mining actions contracted by 6% in Q3, in accordance with KNBS.
Regardless of these sectoral declines, there have been some constructive macroeconomic indicators. The Kenyan shilling appreciated towards main currencies, and inflation fell to 4.08%, its lowest degree because the pandemic, largely attributable to a decline in meals costs.
“On common, the Kenyan shilling gained floor towards the US Greenback (10.1%), Euro (9.3%), and Pound Sterling (7.7%),” KNBS reported.
Whereas the general development was subdued, some sectors confirmed strong efficiency. The hospitality sector surged by 13.7%, logistics grew by 5.2%, actual property rose by 5.5%, and retail expanded by 4.8%. Monetary providers, insurance coverage, and agriculture additionally posted constructive development, at 4.8% and 4.2%, respectively.
World Financial institution lowers development forecast
The World Financial institution has downgraded Kenya’s 2024 development forecast from 5% to 4.7%, citing fiscal challenges stemming from the nation’s debt burden, widespread anti-government protests, and harmful floods in sure areas.
Regardless of this, Kenya’s Ministry of Finance is optimistic, projecting a 5.2% development in 2025, pushed by agriculture, logistics, and retail.
Kenya’s financial slowdown contrasts with stronger development in neighboring Uganda, which posted a 6.7% enlargement in Q3 2024, primarily pushed by agriculture. Tanzania’s economic system additionally outpaced Kenya’s, rising by 6.3% due to a booming tourism sector and elevated funding in infrastructure tasks like the continuing railway growth.
Affect on jobs and shopper spending
The slowdown will seemingly have vital implications for jobs and shopper spending. The development sector alone employs over 230,000 staff, principally from low-income neighborhoods.
Slower development in agriculture and hospitality is predicted to exacerbate unemployment and scale back shopper spending, notably in rural areas the place agriculture employs greater than 40% of the workforce.
