Kenya: Beer, Cigarettes Prop Up Economy
Thursday, July 03, 2008 (GST)

Consumption of beer and Cigarettes kept the economy going in the first quarter of 2008 as post-poll violence took its toll on the country's wellbeing. Food, beverages, and the tobacco sub-sectors increased by 3.1 per cent in the January to March. "The key contributions to this increase were the production of beer, Cigarettes and maize meal," an analysis by the Kenya National Bureau of Statistics indicated. Overall, the country's economic growth, as measured by the Gross Domestic Product (GDP) slowed in the first quarter to record the loWest growth rate in the last six years at negative 1.3 per cent. Robust growth Government projections put full year economic growth at 4.5 per cent down from 7.1 per cent recorded in 2007, mostly driven by a robust growth in second half of 2008. All other manufacturing sectors whose key indicators include cement production (norMally relied on as an indicator of the level of activities in the construction industry), manufacture of textiles, clothing and footwear, throughput of crude petroleum among others, declined by 0.9 per cent in the first quarter of 2008. "The economic implication of the post-election violence and the loss incurred was the main cause of the decline in some key sectors of the economy," the bureau said in its quarterly economic review. Worst hit were the hotel and restaurant industries estimated to have declined by 60.2 per cent in the first quarter of 2008 compared to a growth of 10.1 per cent in the same period of 2007. Scaled down The drop is mainly attributed to massive reduction in international arrivals, cancellation of earlier reservations; closure of international chains of hotels; all associated with the post-election violence. At the time almost all airlines serving European routes cancelled their flights or scaled down the frequency. "In total, about half of the sectors of the economy suffered substantial declines in their outputs," added the bureau. The slow down in product also affected the supply of food triggering off a price spiral that caused inflation to grow by 19.7 per cent in the first quarter of 2008 compared to 7.4 per cent over the same period in 2007. Notable also is fact that, adjusted for the violence impact, the growth rate still declined indicating that the economy was on a downward trend, violence notwithstanding. "The seasonally adjusted GDP decreased by 2.8 per cent in the first quarter of 2008 compared to the fourth quarter of 2007. "This indicates a further decline in the growth of the economy in the first quarter of 2008 compared to a similar decline in the fourth quarter of 2007," concluded the bureau.