Market news
Kenya’s trade deficit falls by Shs 205 billion due to lower imports
Thursday February 18, 2021
A cargo ship arrives in the port of Mombasa. FILE PHOTO | NMG
BY CONSTANT MUNDA
Summary
- The deficit – the gap between imports and exports – decreased from nearly Sh 1.21 trillion in 2019 to Sh.1.001 trillion in 2020, according to preliminary statistics from the Kenya National Bureau of Statistics (KNBS).
- The value of imports in 2020 fell by 8.81 percent or Sh 158.74 billion to Sh 1.64 trillion compared to the previous year, while total exports rose by 7.77 percent to Sh 641.21 billion.
- The depreciation of imports was aided by a drop in spending on petroleum products imports by Sh 103.78 billion, or 31.42 percent, to Sh 226.53 billion, due to lower world market prices and slower economic activity.
The Kenyan trade deficit narrowed by 16.97 percent, or Sh204.57 billion, last year, helped by a double-digit decline in imports due to disruptions in the global supply chain as a result of shutdowns and restrictions from Covid-19.
The deficit – the gap between imports and exports – decreased from nearly Sh 1.21 trillion in 2019 to Sh.1.001 trillion in 2020, according to preliminary statistics from the Kenya National Bureau of Statistics (KNBS).
The value of imports in 2020 fell by 8.81 percent or Sh 158.74 billion to Sh 1.64 trillion compared to the previous year, while total exports rose by 7.77 percent to Sh 641.21 billion.
The depreciation of imports was aided by a drop in spending on petroleum products imports by Sh 103.78 billion, or 31.42 percent, to Sh 226.53 billion, due to lower world market prices and slower economic activity.
Orders for machinery and other capital goods also fell by Sh45.62 billion to Sh278.91 billion at a time when key sectors such as manufacturing were slowing due to low activity.
On the export side, income from key agricultural exports such as tea grew, while income from horticultural products decreased slightly.
Kenya earned Sh 130.25 billion from tea exports, a growth of 14.81 percent compared to 2019.
Horticultural sales fell sharply in the first half as flight capacity largely restricted the international ban on passenger flights. Annual sales fell 1.95 percent to Sh 141.75 billion despite a recovery in the second half of the year.
Foreign sales of cut flowers and vegetables fell 1.98 percent and 19.71 percent, respectively, to Sh 102.8 billion and Sh 21.88 billion, while income from fruit exports fell 4.61 year-on-year Shill billion or 34.97 percent to Sh 17.8 billion rose in 2019.
The decline in orders for goods from abroad contributed significantly to the fact that the current account deficit – the gap between currency inflows and outflows – rose to a decade low of 4.8 percent of gross domestic product (GDP).
The Kenyan central bank attributed this to “savings from lower oil import costs, a strong performance in agricultural exports and resilient remittances” at the end of last month.
A reduction in the trade deficit that extends to the current account will help ease the burden on the shilling, which was devalued against the US dollar by around 7.18 percent to 109.17 units last year.
The governor of the CBK, Patrick Njoroge, has forecast that the current account deficit will be 5.1 percent of GDP this year and will stabilize at around five percent in the medium term.
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