KNBS: Kenya’s GDP expanded by 5.3% in Q1’23

Kenya's economy has recorded its fastest growth in the last four quarters, with the country's GDP expanding by 5.3 per cent in the first quarter of 2023, marking a significant increase from the 3.7 per cent growth registered in the previous period ending in December 2022. The impressive economic performance comes despite challenges such as elevated inflation and a high cost of living. The Kenya National Bureau of Statistics revealed these figures, shedding light on the factors contributing to this growth. Daisy Nitwe, the Lead for Derivatives and Structured Solutions at Stanbic Bank Uganda, shared insights on the drivers of this economic growth. One of the key factors attributing to Kenya's economic expansion is the successful and peaceful completion of the country's recent elections in August 2022. The stable political environment that ensued sent positive signals to investors, encouraging a return to the Kenyan economy. Additionally, Kenya's reliance on agriculture, which constitutes 20 per cent of its GDP, benefited from favorable weather conditions in the first half of the year, further boosting the economic growth trajectory. Moreover, the recovery of the tourism sector post-pandemic has contributed significantly to the overall growth. Furthermore, policy reforms implemented by the government to address macroeconomic imbalances have started to yield positive results. Measures such as the removal of fuel subsidies and reforms in various sectors are enhancing the country's economic stability and attracting more investors. Despite this growth, there have been concerns raised by Kenyan citizens regarding the high cost of living, prompting protests. However, the government's commitment to policy reforms and strategic sectoral focus is expected to sustain the growth momentum. The recent decision by the Monetary Policy Committee (MPC) to raise the ripple rate to 10.5 per cent aims at managing inflationary pressures, although it might lead to higher costs of borrowing for the private sector. This move is in alignment with efforts to curb inflation and slow down consumer spending. The World Bank has praised this decision, anticipating an improvement in forex inflows due to the rising interest rates that create incentives for foreign investors. Looking ahead, the inflation target for the fiscal year 2023-2024 has been set at 5 per cent with a flexible margin of 2.5 per cent. Nitwa is optimistic about achieving this target, attributing it to effective demand and supply-side management policies. While global factors such as oil prices can pose inflation risks, she expressed confidence in the government's ability to navigate these challenges through prudent policies. In conclusion, Kenya's strong economic growth in the first quarter of 2023 reflects resilience and positive momentum despite external and internal pressures. By focusing on maintaining the stability of key sectors, implementing effective policy reforms, and managing inflation, the country is poised to sustain this growth trajectory and continue attracting investments.