GDP growth was expected to reach 5% in 2017, down from 5.8% in 2016, but still well above the sub-Saharan average of 2.7%, according to the IMF.
However, proposed credit changes and the Supreme Court’s decision to uphold the results of October’s presidential election point to a more positive outlook for 2018.
Severe weather conditions affect agriculture
A period of drought, followed by flooding, impacted agricultural production and earnings in key segments of the largest economic sector.
Drought was a major factor affecting green tea leaf production, which declined by 12.4% year-on-year (y-o-y) in the first nine months of the year, according to the Agriculture and Food Authority. Yearly yields are expected to total 420m kg, down from the 473m kg recorded in 2016.
Sugar production fell by 29.5% y-o-y, while coffee sales on the Nairobi Coffee Exchange were down 20.1%, as adverse weather conditions affected crop harvests.
As the drought eased in the fourth quarter, heavy rainfall in some parts of the country led to flooding, further hindering the harvest and transport of crops in key areas.
Maize growers in the west were among the hardest hit, with many unable to dry grains ahead of processing. These production losses led to an increase in crop prices, feeding into inflation.
Agriculture is of vital importance in Kenya, meaning that any downturn has a significant impact on the broader economy; the sector employed around 75% of the workforce during the 2015/16 season and accounts for 30% of GDP.
Inflation steadying amid increase in agricultural output
Fluctuations in agricultural activity contributed to an increase in the cost of living, with inflation rising to 11.7% in May 2017.
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