Economic Growth despite Tourism Setback

Kenya’s economy accelerated in the second quarter thanks to fast growth in construction, manufacturing and financial services, which offset a slump in tourism following attacks blamed on Islamist militants. Gross domestic product (GDP) rose 5.8% from a year earlier in the three months through June and increased 4.0% on a seasonally adjusted quarterly basis, the statistic’s office said later today. In the first quarter it had expanded 4.4% from a year earlier, revised to take account of a recent rebasement of GDP, and 2.7% on a quarterly basis.

Tourism, however, has been badly affected this year by a number of bombings in tourist areas on the coast and elsewhere, which were blamed on Islamist militants and prompted some Western countries to warn against travel to Kenya. Output from the accommodation and restaurant sector slumped 18.6% in the second quarter from a year earlier, the data showed. The slump in tourism means Kenya’s economy will slow this year. Finance Minister Henry Rotich has already cut the government’s 2014 growth forecast to between 5.3% and 5.5% from an initial 5.8%, citing “challenges”, without offering specifics.

Last year the economy grew 5.7%, taking the rebasement into account. The rebasement of GDP last month increased the size of the Kenyan economy by about 25%, pushing it into the top 10 African economies. Construction output rose by 18.9% during the second quarter from a year earlier, manufacturing grew 9.1% while financial and insurance services increased by 8.3%, the data showed.

Agricultural output slowed down, though, rising by 5.5% from a year earlier, after 5.9% growth in the first quarter.

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