Kenya’s Real Gross Domestic Product (GDP) growth slowed down in the second quarter of 2024 as compared to the same period in 2023, the Central Bank of Kenya (CBK) has revealed.
CBK Governor Dr. Kamau Thugge revealed that Kenya’s GDP growth in 2024 Q2 slowed to 4.6 percent as compared to 5.6 percent in 2023 Q2.
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GDP is the most common measure for the size of a country’s economy which measures the value of total final output of goods and services produced by that economy in a certain period.
Dr. Thugge announced on Wednesday, October 9, 2024, while hosting the Monetary Policy Committee (MPC) press briefing in Nairobi.
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The Governor said that the slowed GDP growth reflects a deceleration in growth in most sectors of the economy, adding that construction mining and quarrying sectors recorded contractions.
“The growth projection for 2024 has been revised to 5.1 percent from the previous projection of 5.4 percent, reflecting the growth outcome for 2024Q2 which shows a slowdown in growth,” said Governor Thugge in the presentation.
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Thugge said that the revised projection also reflects a slowdown in private-sector credit growth in several key sectors.
CBK Governor on Kenya’s GDP growth
The governor however said that the resilience of key service sectors, robust performance in agriculture, and improved exports are expected to continue supporting growth.
“Growth will also be supported by enhanced trade initiatives, including AfCFTA, Kenya/EU EPA, Tripartite agreement between COMESA, EAC, and SADC, and bilateral trade arrangements which are expected to boost exports.”
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The CBK boss also highlighted that the main risks to the growth outlook relate to the worsening geopolitical environment.
He however highlighted that projections by the International Monetary Fund (IMF) show that Kenya’s real GDP growth is expected to remain above the global Sub-Saharan Africa (SSA) and emerging market and developing economies average growth rates in 2024 and 2025.
At the same time, Dr. Thugge has revealed that the ongoing implementation of the FY2024/25 Supplementary Budget I is expected to lower the fiscal deficit to 4.3 percent of GDP from 5.2 percent of GDP in FY2023/24.
Total revenues in Supplementary I Budget for FY 2024/25 are projected at Ksh3.060.0 billion (16.9% of GDP), down from Ksh3,343.2 billion (18.5% of GDP) in the initial approved budget, according to the CBK.
Total expenditures are projected at Ksh3.880.8 billion (21.5% of GDP) from the Budgeted Ksh 3,992.0 billion (22.1% of GDP).
On the other hand, the fiscal deficit including grants is projected at Ksh768.6 billion (4.3% of GDP) compared with in the initial approved budget of Ksh597.0 billion (3.3% of GDP).
Net domestic financing and global inflation
Dr. Thugge highlighted that the net domestic financing is projected to reduce from Ksh595.6 billion (3.7 percent of GDP) in FY2023/24 to Ksh413.1 billion (2.3 percent of GDP), due to this deficit, which will in turn ease pressure on interest rates.
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He added that fiscal policy over the Medium Term seeks to implement fiscal consolidation to slow down growth in public debt by ways such as broadening the revenue base and containing non-priority expenditures while enhancing social safety nets.
“The fiscal consolidation in the medium-term should reduce debt vulnerabilities while moving the present-value-of-debt to GDP ratio towards the target anchor of 55 percent,” he added.
Meanwhile, the CBK boss during the MPC briefing said that global inflation has continued to moderate, mainly supported by lower commodity prices, and lagged effects of previous monetary policy tightening.
Thugge said that Central banks in major economies, including the US Federal Reserve, European Central Bank (ECB), Bank of England, and Bank of Canada, have lowered interest rates, with expectations of further reductions in the remainder of 2024.
On the other hand, Global growth continues to recover in 2024, supported by strong growth in the U.S. and India, as well as improved growth prospects in the United Kingdom.
“Global financial conditions have eased, with expectations of further declines in policy interest rates in advanced economies. Bond yields have declined, while the performance of equity markets has improved,” Thugge added.
The CBK has maintained that risks to the global growth outlook relate to elevated geopolitical risks particularly the conflict in the Middle East.
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