Economic growth bodes well for Kenya’s political health: Report

Despite a highly volatile shilling during the year, and a persistent rise in commodity prices, Kenya’s economic growth rose in the third quarter of 2015.

According to data by the Kenya National Bureau of Statistics, the Gross Domestic Product (GDP) of the country in that quarter was 5.8 per cent last year, compared to 5.2 per cent during a similar period in 2014. However, this growth was 1.0 percent lower when compared to the third quarter of 2013.

The KNBS report cites agriculture, construction, financial and insurance as the main sectors driving this growth in 2015. These sectors were in turn able to thrive due to strong macro-economic indicators. “Stable macro-economic indicators such as low inflation and interest rates and a strong shilling,” notes the KNBS report.

In the third quarter of 2015, inflation (the persistent rise of commodity prices) was 6.14 per cent, down from 7.54 per cent during a similar period in 2014, a decline of 1.4 percentage points.

Furthermore, in the same quarter, thanks the Central Bank Rate (CBR), interest rates on commercial bank loans and advances declined to 15.79 per cent, down from 16.40 per cent during a similar period in 2014. CBR is the lowest rate of interest on commercial loans allowed by Central Bank of Kenya.

While in June 2015 it was 10 per cent, a month later it was raised by 1.5 per cent to rein in commercial banks who were charging their customers high interest rates on their loans.

Conversely, during the third quarter of 2015, the Kenyan shilling remained strong against other African currencies such as the South African rand as well as Tanzanian and Ugandan shillings.

This is overall good news for the Kenyan economy as historically the country gears up for a general election in 2017, as the KNBS report implies that the economic sectors are an indicator of good governance.

Trends show that most Kenyan elections have often been accompanied by post-electoral violence which has an adverse effect on the economy. An example is the 2007 general election.

Data from the Kenya Revenue Authority (KRA) shows that the country had a GDP of 5.4 percent in 2007. After the 2008 post-election violence, the GDP dropped to of 1.7 per cent that year.