28 December 2012

Kenya: Construction, Tourism Record Slowest Growth

THE construction and hotels and restaurants sectors recorded the poorest performance in the third quarter of this year, despite an impressive growth in the general economy.

Kenya's economy expanded by 4.7 per cent in the third quarter of 2012 compared 4.0 per cent growth recorded in the same quarter of 2011, according to latest statistics from the Kenya National bureau of Statistics.

The construction industry was estimated to have expanded by only 0.6 per cent compared to a growth of 3.6 per cent last year.

"The slowdown in the activities in the sector is attributable to the prevailing high interest rates given most developers rely on bank credit," said the KNBS report. Most banks are still charging interest rates above 19 per cent.

The slow growth in construction was reflected in the production and consumption of cement whose growths slowed to 0.6 per cent and 1.5 per cent compared to expansions of 8.9 and 7.7 per cent in 2011.

On the other, hotels and restaurants sector growth slowed to 1.1 per cent during the third quarter from 2.1 per cent in the same quarter of 2011.

KNBS attributed this to terrorism threats posed by the political instability in Somalia and a decline in the economic fortunes of major tourist sources like the US and European countries.

The recorded tourist arrivals through Jomo Kenyatta international airport and Moi international airports declined from 383,110 in the previous quarter to 342,135 visitors during the third quarter of 2012.

However, KNBS noted other sectors recorded good performance despite a gloomy start to the year. For instance, agriculture sector improved substantially to 6.9 per cent compared to a paltry growth of 0.2 last year.

"The was largely supported by improved and well spread rains during the second and third quarters of the year," said the report.

The sector had started the year with poor prospects after a number of parts of the country suffered severe frost during the first quarter which negatively impacted on production of tea and other vulnerable crops, while the delay in the onset of long rains led to suppressed agricultural activities.

Electricity and water supply also recorded 13.7 per cent growth from a contraction of 11.1 per cent in the period . This was also due to the high level of rainfall.

Manufacturing also expanded by 4.8 per cent compared to a growth 2.3 per cent during the same quarter of 2011. "The growth in the sector was largely supported by strong expansion in the manufacture of foods mainly buoyed by a rebound in processing of sugar which expanded by 48.7 per cent," KNBS said. Other food products whose processing increased significantly include beer, wheat flour and maize meal.

The quarter under review saw falling inflation rate and stable exchange rate but high interest rates remained. Inflation averaged at 6.4 per cent during the review period from a high 16.5 per cent experienced during the third quarter of 2011.

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