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Economic growth signals more jobs as inflation rises

Saturday September 29 2018

Kenya inflation

Kenya’s inflation climbed steeply in September compared to the previous month due to higher fuel and transport prices. FILE PHOTO | NMG 

BRIAN NGUGI
By BRIAN NGUGI
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Kenya’s real GDP expands 6.3pc in second quarter up from 4.7pc in same period last year after calm returns

The Kenyan economy expanded by an estimated 6.3 per cent in the first six months of 2018 signalling hope for more jobs, even as the cost of living spiked in September after the Treasury slapped value-added tax (VAT) on fuel.

The Kenya National Bureau of Statistics (KNBS) data released on Friday show a rebound in the agriculture sector and a stable macroeconomic environment in the first half of the year helped lift the economy as the knocks of last year’s prolonged electioneering and drought faded away.

“The country’s real gross domestic product is estimated to have expanded by 6.3 per cent in the second quarter of 2018 compared to 4.7 per cent during a similar quarter in 2017,” said the KNBS in a statement.

“The growth was against a backdrop of a fairly stable macroeconomic environment and favourable weather conditions.”

The KNBS said during the period, the country experienced heavy rains that “impacted positively on most of the agricultural and generation of hydroelectricity activities”.

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“Activities of agriculture, and electricity and water supply recorded significant improvements to grow by 5.6 per cent and 8.6 per cent compared to growths of 0.8 per cent and 6 per cent, respectively during the second quarter of 2017,” said the KNBS.

This came as Kenya’s inflation climbed steeply in September compared to the previous month due to higher fuel and transport prices.

The rate rose to 5.7 per cent, from 4.04 per cent in August, the agency said, representing a 12-month high.

“During the review period (between August and September 2018), the transport index increased by 7.99 per cent compared to the previous month and 17.29 per cent compared to the same month in 2017,” the KNBS said.

“This was mainly on account of increase in the pump prices of petrol and diesel which triggered an increase in prices of other transport components.”

Kerosene recorded the steepest price rise of 27.2 per cent to Sh109.25 a litre, followed by matatu fares, which rose 7.9 per cent to Sh449.77 on average.

At 5.7 per cent, the September inflation is within the Central Bank of Kenya preferred range of between 2.5 per cent and 7.5 per cent.

President Uhuru Kenyatta on September 21 signed into law the Finance Act 2018, which comes with several new consumer taxes and levies including the eight per cent VAT on fuel products aimed at growing government revenue and reducing the budget deficit as demanded by the International Monetary Fund.

The rebound in economic growth is expected to give some relief to the Kenya Revenue Authority, which has struggled to meet revenue targets due to a softer economy, which expanded at the slowest pace in five years in 2017.