A slowdown in services resulted in the economy contracting to 5.4 per cent last year from 6.3 in 2018, Treasury Cabinet Secretary Ukur Yatani has said.
And, as the country battles the coronavirus, Mr Yatani has downgraded this year's economic growth outlook to between 1.8 and 2.5 per cent from the forecast six per cent.
"The performance will largely be determined by how long lives and economic activities will be disrupted by Covid-19," the minister said yesterday during the launch of the Kenya National Bureau of Statistics (KNBS) 2020 Economic Survey.
"Most of the economic activities have so far been slowed down by restrictions resulting from containment of sections of the population, the nationwide curfew and stoppage of international passenger travel."
Treasury now says it is planning to undertake studies in the various sectors of the economy to assess the impact of Covid-19.
"Earlier in the year, we experienced invasion of the desert locusts mostly in the arid and semi-arid areas, but we have managed to mitigate their negative impact on agriculture. In the short term, our fiscal policies in the national budget are likely to focus on reorientation of expenditure to initiatives aimed at control and eventual elimination of Covid-19," he said.
Lower food prices
The 2020 Economic Survey report showed that almost all segments of the economy in 2019 recorded a dip in their growth, save for the financial services sector. The country also saw its cost of living edge upwards from 4.7 per cent in 2018 to 5.2 per cent in 2019, mainly due to less favourable conditions in the year, though registering gradual improvement over its remainder, resulting in a drop in food prices.
Agriculture, forestry and fishing grew by 3.6 per cent in 2019 compared to 6 per cent in 2018, with the contraction occasioned by a drought in the first half of 2019. Away from coffee production and horticultural exports, which increased, other produce such as tea and sugarcane drop ped 6.9 per cent and 12.5 per cent, respectively.
The manufacturing sector slowed down to 3.2 per cent in 2019 compared to a growth of 4.3 per cent the previous year.
"The growth was attributed to an increase in production of motor vehicles, trailers, plastics, animal and vegetables fats and oils and pharmaceutical products," Mr Yatani said.
Sub-sectors such as production of cement, wood, sugar, electrical equipment and other non-metallic mineral products registered declines during the period under review.
The building and construction sector also saw a drop in growth from 6.9 per cent in 2018 to 6.4 per cent last year, attributable to the gradual ending of activities related to the construction of the Standard Gauge Railway (SGR).
The slowdown in the sector's performance was reflected in consumption of cement, which declined marginally.
Last year also saw the total length of roads paved increase by 14.2 per cent to 21,295 kilometres.
"Our financial and insurance sector remained on a growth trajectory to expand by 6.6 per cent in 2019 compared to the 5.3 per cent growth realised in 2018," Mr Yatani said, adding that the financial services sub-sector grew by 5.7 per cent in 2019, up from to 4.8 per cent recorded in 2018.
Domestic credit up
Domestic credit grew by 7.5 per cent last year, compared to growth of 6.4 per cent, while credit to the national government increased from Sh859.1 billion in 2018 to Sh900.4 billion as at the end of last year. The credit to the private sector rose by 7.1 per cent from Sh2.49 trillion in 2018 to Sh2.66 trillion last year.
"In the insurance sub-sector, net premiums from life insurance increased from Sh80.4 billion in 2018 to Sh90.5 billion, while the general insurance business recorded a contraction of 1.1 per cent last year," he said.
Accommodation and food service activities were vibrant in spite of the pockets of insecurity that saw it contract by 10.3 per cent last year, compared to growth of 16.6 per cent in 2018.
"The growth of the sector in the period under review was supported by heightened security, relaxation of travel advisories by governments of key tourism markets and political stability that prevailed in the country," he said.
The number of international visitor arrivals increased by 0.4 per cent to 2.03 million in 2019, a slower growth compared to a 14.0 per cent rise in 2018. Tourism earnings grew by 3.9 per cent from Sh157.4 billion in 2018 to Sh163.6 billion in 2019.
In the energy sector, the total volume of petroleum products imported stood at 6.4 million tonnes in 2019, while exports of domestic petroleum products declined by 16.3 per cent. The total import bill of petroleum products decreased to Sh316.6 billion.