Kenya’s economy expanded by 5.6 per cent in 2015 compared to 5.3 per cent growth in 2014. In absolute terms, the country’s Gross Domestic Product (GDP) at current market prices stood at KSh6.2 trillion in 2015.
This growth was mainly supported by a stable macroeconomic environment and significantly improved performance of agriculture, construction, finance and insurance and real estate sectors. However, accommodation and food services remained largely subdued and contracted by 1.3 per cent in 2015 which was a less severe performance compared to a decline of 16.7 per cent in 2014.
The year under review was characterised by inflationary pressures and volatility in exchange rate. Subsequently, the monetary policy was principally aimed at achieving and maintaining stability in the general price levels in the economy with the ultimate goal of achieving an inflation target of five per cent.
As a result, Central Bank Rate (CBR) was raised from 8.5 per cent to 10.0 per cent in June, and further to 11.5 per cent in July. There was mixed performance in interest rates during 2015 on account of the changes in the CBR.
The 91-day Treasury bill rate dropped from 8.58 per cent in December 2014 to 8.26 per cent in June 2015 and rising to 9.81 by December. Commercial banks’ loans and advances and lending interest rates rose to 17.45 per cent in December 2015 from 15.99 per cent in December 2014.
Overall inflation eased from 6.9 per cent in 2014 to 6.6 per cent in 2015 mainly due to lower prices of energy and transport. Monthly inflation rate fluctuated between 5.5 per cent and 8.0 per cent but was largely contained within the Central Bank’s target throughout the year.
The Kenya Shilling exhibited considerable stability buoyed by the significant fall in the international oil prices and increased diaspora remittances. However, the continued underperformance of the tourism sector negatively affected the strength of the shilling in 2015.
The dismal performance in the tourism sector was attributed to security risks posed by terrorism, the aftermath of Ebola pandemic in West Africa and partly to some countries’ failure to lift travel advisories issued in the past.
The growth in agriculture was mainly supported by improved weather condition that resulted in significant increase in outputs of maize, horticultural produce and livestock.
The construction sector remained vibrant in the year under review to record an accelerated growth of 13.6 per cent mainly driven by the ongoing public infrastructure development coupled with a significant growth in the real estate sector. Transport sector registered a marked growth in 2015 on account of low oil prices which is a key input in the sector.
Electricity production increased by 9.7 per cent in 2015 mainly attributed to increased production of geothermal energy coupled with lower fuel costs for thermal power generation.
The financial and insurance sector maintained a robust expansion to grow at 8.7 per cent in 2015. This growth was mirrored by a 19.2 per cent rise in total domestic credit to KSh2.8 trillion in December 2015 compared to a growth of 16.1 per cent in December 2014.
The ratio of current account balance to GDP improved notably from 11.0 per cent in 2014 to 7.6 per cent in 2015 largely due to a decline in the import bill against a substantial growth in export earnings. The decrease in the import bill was mainly due to the fall in the international oil prices.
The financial sector continued to post impressive performance in 2015 owing to a considerable expansion of the financial services sub-sector. However, the growth was somehow dampened by the continued decline in the level of activity in the insurance sub-sector whose growth slowed down to 4.9 per cent in 2015.
The financial sector’s performance was clearly manifested in the performance of other sectors especially construction, manufacturing and agriculture that recorded significant rise in credit advanced by commercial banks and cooperative societies. The growth was also driven by a significant growth in domestic credit to the National Government from KSh424.9 billion in 2014 to KSh538.0 billion in 2015. (KNBS)