The Central Bank of Kenya (CBK) has cut its economic growth forecast to 5.1 percent, down from 5.4 percent, citing slower growth in the second quarter on diverse factors including suppressed credit flows.
The country registered a slower 4.6 percent Gross Dometic Product (GDP) growth in the second quarter compared to 5.6 percent at the same time last year.
“The growth prospects for 2024 have been revised downwards to 5.1 percent from our previous projection of 5.4 percent reflecting the outcomes of the slowdown seen in the second quarter and the slowdown in private sector credit to several key sectors,” CBK Governor Kamau Thugge told a media briefing on Wednesday.
The Kenyan economy grew at its slowest pace in four years during the second quarter since the pandemic as key sectors including agriculture, electricity and water supply, transport and storage, accommodation and food services, finance, and insurance all marked a slowdown in growth.
The construction, mining, and quarrying sectors remarkably contracted, resulting in the slowest second-quarter growth since the pandemic.
The services sector is expected to anchor growth in 2024 by expanding by 6.2 percent, led by accommodation and food services.
Manufacturing, which marked the only sectorial expansion in three months ended in June, is meanwhile set to grow by 2.7 percent from two percent in 2023.
The collapse of private sector credit growth to just 1.3 percent in August has been factored in the expected growth deceleration even as the services and agriculture sectors provide key offsets. External shocks from a potentially worsening geopolitical environment are seen as the main risk to the growth outlook.
GDP grew by a faster rate of 5.6 percent in 2023 compared with 4.9 percent in 2022 on positive outcomes in most sectors of the economy.
The agriculture, forestry, and fishing sector grew 6.5 percent in 2023, marking a recovery from the 1.5 percent contraction recorded in 2022.
