Kenyan Economy Weakened in Q3 of 2015

Kenya’s economy grew 5.8 percent in the third quarter as authorities failed to meet their original growth target of 7 percent, according to Reuters. The government lowered the forecast in reaction to heavy rainfall and a smaller budget, but the overall state of the economy has remained stable. The construction and agriculture sectors contributed most to Q3 expansion, but the economy contracted due to a fall in tourism caused by an onslaught of Islamic militants.

Kenya’s economy grew 5.8 percent in the third quarter as authorities failed to meet their original growth target of 7 percent, according to Reuters. The government lowered the forecast in reaction to heavy rainfall and a smaller budget, but the overall state of the economy has remained stable. The construction and agriculture sectors contributed most to Q3 expansion, but the economy contracted due to a fall in tourism caused by an onslaught of Islamic militants.

Construction expanded faster than any other sector, reaching 14.1 percent in Q3, and use of cement grew over 10 percent. In addition, the agriculture sector came in at 7.1 percent because of lucrative weather conditions, but vital tea production dropped in 2015. The restaurant sector contracted 2.3 percent after falling over 20 percent in 2014, partially explained by rising terrorism across the region.

Spreading Extremism

Kenya is one of multiple nations in Africa contending with declining security as militants tear through the East African country. One of Kenya’s most brutal attacks occurred last year, when 129 people were murdered, and Kenyans suffered another blow when 147 people succumbed to a terrorist attack at Garissa University College. Many investors grow nervous in light of the incursions, which does not bode well for a nation that needs foreign investment to sustain the economy.

Whereas West African countries such as Nigeria deal with terrorist group Boko Haram, East Africa faces Al-Shabaab, a jihadist group based in Somalia, but crosses the border to conduct attacks in Kenya, and the government must contend with other Al Qaeda-linked groups. In the past three years, up to 500 people have lost their lives because of terrorism.

Kenya remains the largest market in East Africa, but its status as a strong emerging market will wane if security does not improve, and the nation stands the risk of missing its middle-income goal by 2030 if terrorists continue to overrun the region. According to the Global Risk Insights index, Kenya will need to maintain a lucrative business environment by enhancing security not only within its borders, but in the surrounding region as well, notes the East African.

Kenya’s Progress

Kenya’s high poverty rate poses another risk to overall stability. The government has drastically reduced poverty since 2000, but more people live in destitution today than in the 1990s, and life expectancy outcomes have not changed since the 1980s. Moreover, the government has failed to divert enough money to health care services, and Kenya has struggled with a lack of medical professionals.

However, the root of insufficient resource allocation partly traces back to the country’s high corruption rate, which is something Kenya will need to address for the sake of developmental and economic success.