Kenya's economy grows 4.4% in Q1, agriculture rebounds

By Duncan Miriri

July 1, 2010 3:16 PM EDT

Kenya's economy grew by 4.4 percent in the first quarter of this year from 5.6 percent in the same period last year and agriculture turned positive after six quarters of contraction, the government said on Thursday.

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On a seasonally adjusted basis, GDP expanded by 3.4 percent during the quarter against the last quarter of 2009.

"This represents the highest quarter to quarter growth since the fourth quarter of 2004," the Kenya National Bureau of Statistics (KNBS) said in a statement.

"All industries except electricity supply recorded positive growth in the first quarter 2010."

In addition to good weather, analysts said the data indicated sustained efforts by policy-makers to lift growth, through easing measures, were starting to bear fruit.

"It looks like the CBK's (Central Bank of Kenya) efforts to kick start the economy are working, one cannot rule out some luck on their (CBK's) part, given that most gains were occasioned by favorable weather," said Chris Muiga, a senior trader at Kenya Commercial Bank.

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KNBS said agriculture, which accounts for nearly 25 percent of GDP in east Africa's largest economy, expanded by 4.6 percent during the period, after six straight quarters of negative growth.

"The expansion was mainly supported by improved output of tea, maize, beans, potatoes and milk. However, output of horticultural products, coffee and sugar cane declined," the bureau said, adding the gains outweighed the falls.

RISING TIDE OF UPGRADES

The east African nation which is the region's largest economy has had good rainfall since late last year after a prolonged drought in many parts of the country that caused food shortages and power outages.

"Other sectors that recorded sizeable growth during the quarter were financial intermediation, mining and quarrying, manufacturing, construction, transport and communications and wholesale and retail trade," the bureau said.

They expanded by between 11.9 percent for the financial sector to 3.7 percent for wholesale and retail trade. Manufacturing posted a 7.8 percent growth in the period, up from 5.0 percent a year earlier, KNBS added.

Electricity and water posted negative growth, dragged down by increased thermal generation, a holdover from last year's drought.

Officials expect the country to expand by 4.5 percent this year, higher than 2.6 percent in 2009, but still some way from its 2007 peak of a 7.0 percent growth.

"This is the first shot across the bows and we might find ourselves surfing on a rising tide of economic upgrades. I expect further traction and for the country to come close to 5.0 percent GDP (growth) this year," said Aly Khan Satchu, an independent analyst.

"As long as the politicians stay in their box and the referendum is put to an honest Vote and without any shenanigans."

Voters decide on August 4 whether to adopt a proposed new constitution, whose passage is viewed as an important requirement for political stability.