Fresh monthly data from the Kenya National Bureau of Statistics show that exports in January and February amounted to Sh85.71 billion, a three-year low compared to the Sh86.45 billion recorded in the first two months of 2012.
This year’s exports are 8.6 per cent lower than the Sh93.82 billion earned in the first two months of 2013. The deceleration comes at a time imports in the period decreased slightly by four per cent to Sh237.19 billion compared to Sh247.18 billion in 2013, but were 16.4 per cent or Sh33.47 billion higher than the Sh203.72 billion in a similar period in 2012.
The numbers suggest the widening trade deficit could temper Kenya’s Gross Domestic Growth in the first quarter, which would set a bleak trend for the year amid a worsening current account deficit.
The country’s trade deficit widened last year to Sh904.5 billion from Sh859 billion in 2012, KNBS data show, as exports declined while imports leaped at a faster pace. Decrease in exports’ value has been attributed to poor commodity prices in global markets.
“The trade balance worsened on account of a decline in exports an increase in imports…. Poor international prices of key exports: tea, coffee and fresh horticultural products also contributed to the deterioration of the trade balance,” the Economic Survey 2014 states.
Daniel Kuyoh, a research analyst at Kingdom Securities, said a slow global demand for commodities is beginning to emerge and has not spared Africa.
“Our main foreign exchange earners – tourism and horticulture – have seen slower demand not just in the western world but in regional markets as well. We are not seeing a significant growth in domestic demand, as such we could expect to see the trade deficits begin to widen further,” Kuyoh said.
While the shilling has remained relatively stable, he said, Kenya’s exports are being priced out internationally as a result of an unfavourable tax regime instituted last year.
“We could possibly see a lower than estimated first quarter GDP growth with lower production levels attributed to cost-cutting measures (as seen in EABL) as well as higher input costs,” Kuyoh said.
Aly-Khan Satchu, a macroeconomic and geopolitics analyst, however expects the country’s GDP to grow faster despite the poor show in the initial months.
“Clearly 2013 GDP was softer at 4.7 per cent than practically anyone projected. Export values have been crimped and that probably speaks a very soft tea price structure,” Satchu said.
“I have seen research which shows that the current account would be in balance if the importation of heavy machinery related to oil and gas were stripped out. In my view the condition precedent for everything is faster GDP growth.
Kenya’s GDP grew by 4.7 per cent last year compared to 4.6 per cent in 2012. The World Bank projects that Kenya’s GDP could expand by 5.1 per cent this year helped by a stable macroeconomic environment, but warns of hovering domestic and external risks.
