26 March 2008
Nairobi — The effects of the post-election violence and the impending drought will adversely affect the country's economic growth momentum.
Though performance was robust with Gross Domestic Product estimated to have grown by seven per cent last year, the growth might slow down this year.
A report compiled by the Kenya National Bureau of Statistics says though economic growth prospects are positive, the momentum might be slowed by the long-term effects of the violence which will affect the agricultural sector - the country's economic backbone.
Food shortages loom
The short-term effects were felt in the service sector, mainly transport and communication.
Recently, the Meteorological Department warned of food shortages in the near future, forecasting that the current long rains will not be adequate and reliable.
According to the report, last year's record economic growth was supported by improved performance in agriculture, tourism (hotels and restaurants), manufacturing, building and construction, financial services, transport and communication and household consumption.
The agricultural sector grew by 7.6 per cent last year, up from 5.5 per cent the previous year.
"This was supported by improvements in infrastructure and favourable weather conditions," the report says. The favourable weather conditions saw the production of tea, coffee, horticulture and sugar cane increase.
However, it is feared that growth in the agricultural sector may be compromised this year following the displacement of farmers in the post-election violence.
The generation of electricity, which accounts for a chunk of the cost of production of goods and services, also increased by eight per cent last year with total generation standing at 6,287.7 million kilowatts hours, compared with 5,823.0 million kilowatt hours the previous year.
Tourism, another major foreign exchange earner, saw arrivals increase by 9.9 per cent from 954,335 in 2006 to 1,048,732 last year. Earnings and visitor arrivals in the sector are expected to decline this year after Western countries issued travel warnings to their citizens. Some of the countries are yet to lift the ban.
Lost value
Imports also became expensive following the depreciation of the shilling in the past two months.
Early last month, the shilling lost value against the US dollar, to trade at Sh70.5 compared to Sh65 late last year. It also declined against other currencies like the Sterling pound, Euro and Japanese yen and the regional Ugandan and Tanzanian currencies.
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