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Key drivers of Kenya’s economic growth

Kenya National Bureau of Statistics data show the economy expanded by 4.9 per cent last year compared to a revised growth of 5.9 per cent in 2016. The slowdown was partly attributed to uncertainty associated with prolonged electioneering and adverse weather conditions.Below are top sectors that supported growth, according to the Economic Survey 2018.

1. Accommodation and food services

The sector remained on a recovery path to grow by 14.7 per cent last year compared to a revised growth of 13.3 per cent in 2016. Earnings from tourism activities increased markedly (20.3 per cent) from Sh99.7 billion in 2016 to Sh119.9 billion last year.

Number of international visitor arrivals grew by 8.1 per cent to 1.45 billion last year from 1.34 billion in 2016. This resulted in an increase in hotel bed-night occupancy from 6.45 billion in 2016 to 7.17 billion last year.

2. Information and communication

The sector expanded by 11 per cent last year compared to 9.7 per cent in 2016. Growth in the sector was principally driven by improved performance in the telecommunications sub-sector, which rose by 12.7 per cent last year.

The enhanced performance in the telecommunications activity was mainly on account of a notable increase in the volume of call traffic from 42.2 billion minutes in 2016 to 44.1 billion minutes last year.

Similarly the number of Short Message Service (SMS) rose significantly to stand at 65.7 billion during the review period. Mobile money transfers rose to Sh3.6 trillion last year while the number of mobile commerce transactions increased almost two-fold.

3. Construction

Activity in the sector remained robust though the growth decelerated for the second year in a row to stand at 8.6 per cent last year.

Cement consumption decreased by 8.2 per cent from 6.3 million tonnes in 2016 to 5.8 million tonnes last year, an indication of a slowdown in growth of construction activity compared to the previous year. The sector’s growth was also driven by intensified civil works that led to a significant increase in the length of bitumen road.

4. Manufacturing

The sector posted a marginal growth of 0.2 per cent last year compared to a revised growth of 2.7 per cent in 2016. Volume of food products manufactured declined by 10.8 per cent compared to 1.9 per cent in 2016.

The performance of the sector last year was negatively affected by reduced activity in agro-processing that emanated from constrained domestic supply of agricultural raw materials.

In the food sub-sector, notable growths were realised in the manufacture of grain mill products (8.3 per cent), bakery products (8.1 per cent) and animal feeds (8.6 per cent).

5. Agriculture, forestry and fishing

The sector posted a decreased growth of 1.6 per cent in 2017 compared to a revised growth of 4.7 per cent in 2016. Unfavourable weather conditions considerably suppressed production of key crops and adversely affected production in the livestock sub-sector.

In the dairy sub-sector, the quantity of milk delivered to processors declined from 648.2 million litres in 2016 to 535.7 million litres last year.

Growth in the sector was supported by notable increases in production of cut flowers, fruits and vegetables whose exports grew by 19.7, 16.8 and 10.7 per cent respectively last year, translating to a significant increase in the value of export of horticultural produce from Sh101.5 billion in 2016 to Sh 115.3 billion last year.

6. Transportation and storage

This sector remained vibrant despite its growth slowing to 7.3 per cent last year compared to a 7.8 per cent growth in 2016. Performance of land freight dropped from 5.9 per cent in 2016 compared to 1.9 per cent last year mainly due to depressed volumes of transportation of freight through road and railway.

Number of newly registered lorries/trucks, pick-ups and heavy vans commonly used to transport goods declined by 22.5 per cent. Performance in the sub-sectors was comparatively better last year. Total port throughput grew by 10.6 per cent last year while the number of ships that docked at the Port of Mombasa increased from 1,607 in 2016 to 1,767.

7. Financial and insurance activities

The sector’s growth decelerated to 3.1 per cent last year, mainly on account of significantly constrained growth in financial activities despite better performance in insurance activities. Performance of activities of the financial sub-sector decelerated significantly from a growth of 6.9 per cent in 2016 to 2.6 per cent last year.

A drop in the growth of credit to the private sector from 4.1 per cent in 2016 to 2.4 per cent last year reflected the general performance in the financial sub-sector. However, total domestic credit rose by 7.9 per cent compared to 6.4 per cent in 2016, primarily due to a 12.1 per cent growth in credit to the national government.

8. Electricity supply

Growth of gross value added of electricity supply decelerated to 6.9 per cent from a revised growth of 9.5 per cent in 2016. Slowdown in performance was mainly attributable to depressed generation of hydro-electricity due to failure of short rains during the period and reduced long rains last year.

Hydro generation declined by 29.9 per cent from 3,959.9 GWh in 2016 to 2,776.8 Gwh last year. Thermal generation increased significantly (72.3 per cent) from 1,470.9 GWh in 2016 to 2,534.1 Gwh last year. Renewable energy sources was supported by notable improvements in the generation of electricity using wind (8.7 per cent) and geothermal (6.1 per cent).

9. Education sector

The government has been implementing various reforms aimed at improving the quality of education. It continued to fund Free Primary and Day-Secondary Education last year and registered more Technical and Vocational Education and Training (TVET) institutions to increase access to vocational and technical training.

During the same period, it increased budgetary allocation to the sector mainly on account of increased funding for basic and university education. The total expenditure for Ministry of Education, which includes that of Teachers Service Commission is expected to grow by 31.6 per cent from Sh315.6 billion in 2016/17 to Sh415.3 billion in 2017/18.

The number of educational institutions increased by 5.1 per cent to 90,587 in 2017. During this period, pre-primary schools went up by 1.3 per cent to 41,779 while primary schools rose by 6.7 per cent to 35,442.

10. Environment and natural resources

In 2017, the sector registered mixed performance in indicators. The total expenditure by national government on water and related services is expected to decline by 19.1 per cent from Sh43.9 billion in the year 2016/17 to Sh35.5 billion in 2017/18.

The value of fish landed, which has been on the decline for the last three consecutive years, dropped further by 6.1 per cent to Sh23 billion last year. The total value of mineral output increased by 2 per cent to Sh23.8 billion last year. Most parts of the country experienced reduced rainfall and rising temperatures during the review period.

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