REPORT SAYS GOOD RAINFALL PUSHES KENYA’S ECONOMIC GROWTH ON THE UPWARD TREND WITH GDP CLOCKING TO 4.2 PER CENT.

Business and Economic news By Leo Odera Omolo in Kisumu City

The latest economic growth report recently released by the Kenya National Bureau of Statistics {KNBS}in its excellent a GDP series, reveals how dependent Kenya is on agriculture.

It says that after disappointing fourth quarter last year, the economy seemed to be bouncing back with GDP growth {at 2001 prices} for the first quarter clocking 4.2 per cent, compared with 2.5 per cent in the last quarter.

This was significantly lower from the performance of the economy during the same period last year, but a whole world apart from the 1.4 per cent growth rate posted in 2007 –when post election violence occurred.

The normal rainfall pattern has boosted economic growth in a big way this year and this trend is expected to continue. Agriculture, mining, manufacturing and retail are the big engines of growth,’ the report says.

“The banking sector grew by 11.9 per cent and it is expected to gather pace as banks start lending more aggressively, “it adds.

For the first time in six consecutive quarters, agriculture posted a GDP growth of 4.6 per cent in the first three months of 2010thanks to short rains towards the end of last year. Though the figures are pointing a rosy picture, there are concerns simmering in the economy.

First, for the fund managers better economic performance means increased contributions, but with limited invested options they are challenging their funds to take up more government securities.

The 25 year bond was heavily oversubscribed, realizing Kshs 27 billion against a target of Kshs 5.7 billion. Industry players attribute this to lack of new investment opportunities. Hence the Kshs 15 billion Kenya Commercial Bank is seeking will be realized easily.

Secondly from the GDP figures, over reliance on hydro-electricity was highlighted. Electricity supply was the only economic activity which registered a negative growth of 2.1 per cent, as the country depended on thermal power. KNBS noted that “ the gains from high rainfall during the first quarter have not been realized in the sector.

Third, the construction sector seems to be losing some steam. In the first three months of 2010 it posted a 4.8 per cent growth. Building costs are rising, which is pushing up the cost of housing. Sellers are settling for lower prices than previously anticipated.

Ends

leooderaomolo@yahoo.com