Construction and agriculture power GDP growth to 5.8pc

Money Markets

Workers at the standard gauge railway construction station site. The construction sector has been touted as one of the economic growth drivers in the third quarter. PHOTO | FILE | NATION MEDIA GROUP 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• The statistics bureau attributed a 23.3 per cent jump in new bank credit — equivalent to Sh579 billion — as among the major factors that propelled overall growth in several sectors during the three months to end of September.
• The agricultural sector expanded by 7.1 per cent from 6.8 per cent in the same quarter last year, reflecting the impact of the long rains recorded between March and May.
• Construction – comprising new buildings, roads and rail – saw a frenetic activity, expanding by 14.1 per cent during the three months compared to 8.8 per cent in the same period last year.
• The growth in construction was supported by increased credit to the sector.

Economic growth surged to 5.8 per cent in the third quarter ended September compared to 5.2 per cent in the same period last year, reflecting robust activity in agriculture and construction sectors but indicating that the expansion rate could fall short of the Treasury’s annual target.

The financial and insurance, wholesale and retail trade and transport and storage sectors were the other the main drivers of economic growth in the period, according to data released by the Kenya National Bureau of Statistics (KNBS) yesterday.

With the simple average of growth rate in the first nine months of the year now standing at 5.5 per cent, it would require an even more robust economic expansion in the fourth quarter for the Treasury to realise its annual target of between 5.5 and 6.0 per cent.    

“The [5.8 per cent] growth was mainly supported by strong expansions in agriculture, construction; financial and insurance, wholesale and retail trade, and transport and storage. Activities of the construction industry recorded the fastest growth of 14.1 per cent,” said KNBS director-general Zachary Mwangi in a statement.

The Treasury has steadily lowered the 2015 annual growth target from the original estimate of seven per cent, citing a range of factors, including higher costs of credit and the destructive El Nino rains. A lower growth outcome means the economy will not generate as many jobs as the Treasury had projected, confining the unemployed to more misery.

The statistics bureau attributed a 23.3 per cent jump in new bank credit — equivalent to Sh579 billion — as among the major factors that propelled overall growth in several sectors during the three months to end of September.

The agricultural sector expanded by 7.1 per cent from 6.8 per cent in the same quarter last year, reflecting the impact of the long rains recorded between March and May.

“The growth was supported by increase in the production of most major crops and the dairy sub-sector against a background of improved weather conditions,” said the KNBS.

Construction – comprising new buildings, roads and rail – saw a frenetic activity, expanding by 14.1 per cent during the three months compared to 8.8 per cent in the same period last year.

The growth in construction was supported by increased credit to the sector, the statistics bureau said.

“The accelerated growth was mirrored in the increased credit advanced to the sector and cement consumption,” said the KNBS.

Credit advanced by commercial banks to the construction sector increased in the third quarter to Sh100.8 billion from Sh78.8 billion in 2014. The growth mirrored the trend in cement consumption, which increased by 10.7 per cent from 1.3 million metric tonnes in the third quarter of 2014 to 1.4 million metric tonnes in the same period this year.

Other economic sectors that performed well during the quarter were transport and financial services. The real estate sector — measured in terms of rent earnings — was slower at 5.4 per cent compared to 6.2 per cent in the same quarter last year.

Joseph Kieyah, an economist based at the Kenya Institute of Public Policy Research and Analysis (KIPPRA), said that the growth was consistent with the increase in consumption, investment and government spending in recent months.

“We have seen that the government is spending and consumption is there. We have also had new investments such as in the standard gauge railway and roads. That definitely has continued to drive growth,” said Prof Kieyah.