April 29, 2015 / 10:11 AM / 4 years ago

UPDATE 2-Kenya's economic growth slowed last year, outlook better

(Adds minister’s comments on 2015 outlook, analyst)

By Duncan Miriri

NAIROBI, April 29 (Reuters) - Kenya’s economic growth eased to 5.3 percent in 2014 as tourism fell and agricultural output slowed, but should pick up this year, a minister said on Wednesday.

East Africa’s biggest economy has struggled with a number of challenges in the past year, including attacks blamed on Somalia’s al Shabaab militants that have scared away tourists, and periodic droughts that have reduced farm output.

“Factors that impacted negatively on the tourism sector include security concerns, negative travel advisories and fear of the spread of Ebola,” said Anne Waiguru, the devolution and planning cabinet secretary.

Earnings from tourism fell 7.3 percent last year to 87.1 billion shillings ($921.69 million) as visitor numbers dropped 11 percent, Waiguru said in a presentation to press.

The economy slowed after a 5.7 percent expansion in 2013, but the government has said it expects growth to rebound to 6.9 percent this year, even though further attacks blamed on al Shabaab this year, including this month’s attack on a university in which 148 people were killed, are likely to dampen tourism.

The World Bank forecasts 6 percent growth this year.

Waiguru said an improving global economy, helped by lower oil prices, would help Kenya’s economy.

“This is expected to impact positively on Kenya’s economic growth,” she said, adding any shortfall in the long rains could keep agricultural output close to its 2014 level.

Exports of tea, fresh produce, coffee and textiles accounted for just over half of the country’s total export earnings last year.

Waiguru said increased government spending on roads and railways had helped growth in the construction sector, but growth in agricultural output slowed to 3.5 percent, from 5.2 percent in 2013, due in part to erratic rainfall.

Economic growth for 2013 growth was revised upwards after a rebasing last September, when Kenya’s gross domestic product was estimated to be 25 percent bigger after the authorities changed the base calculation year to 2009 from 2001.

“The positive impact of a lower global oil price and increased domestic geothermal production will boost economic growth in 2015 and should counter weaker growth in agriculture and tourism,” Mark Bohlund, senior economist for sub-Saharan Africa at IHS Economics, said.

“However, these will largely be one-off boosts resulting in a slowing in real GDP growth from a projected 6.6 percent in 2015 ... to 6.0 percent in 2016.”

The current account deficit increased by 30.2 percent to 536.1 billion shillings in 2014, Waiguru said.

However the overall balance of payments position improved to a surplus of 126.1 billion shillings, up from 31.8 billion in 2013, mainly due to increased foreign exchange reserves, boosted by the country’s debut Eurobond. ($1 = 94.5000 Kenyan shillings) (Additional reporting by George Obulutsa; Editing by James Macharia and Susan Fenton)

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