Rising fuel and food prices boosted Kenya’s annual inflation in March to 5.9%. This is the highest level since last April, Nairobi-based Kenya National Bureau of Statistics said Wednesday. On a monthly basis, the Consumer Price Index, which measures what buyers pay for everyday items like food and clothing, increased by 0.4%, slowing from a 0.7% increase in February.
The annual inflation accelerated for a sixth straight month in March, from 5.78% in February,
as transport costs rose (18.12% vs 16.73% in February), due to an increase in fuel prices as a result of the rising cost of importing oil products. Petrol went up 10.34% (vs 3.06%), diesel 5.83% (vs -2.40%) and kerosene 2.47% (vs -9.92%)
Additional upward pressure came from prices of food & non-alcoholic beverages (6.65% vs 6.93%); housing & utilities (4.01% vs 3.38%); health (4.12% vs 4.34%) and restaurants & hotels (4% vs 4.01%).
The National Bureau of Statistics release comes two days after Kenya’s central bank (CBK) held its benchmark interest rate at 7% for the 7th time, saying inflation remained well-anchored and is forecast to remain stable in the short run.
Policymakers confirmed the CBK still expects the economy to rebound strongly this year saying that the package of accommodative monetary policies, together with the fiscal stimulus announced in the FY2020/21 Budget, have been appropriate to support the economy.
Officials also noted that the economic recovery observed in the fourth quarter of 2020 and in the first quarter of 2021 was mainly driven by robust performances in the sectors of agriculture, construction, real estate, finance and insurance, and wholesale and retail trade.
In the third quarter of last year, Kenya’s economy shrank 1.1 percent year-on-year, following a downwardly revised 5.5% plunge in the second quarter. It marks the first country’s recession in nearly two decades.
Accommodation and food service activity which includes the tourism sector remained severely affected (-57.9% vs -83.2% in Q2), followed by education (-41.9% vs -56.2%) and professional, administrative activities (-12.3% vs -15.3%).
Four recent CBK surveys of the private sector, including hotels and flower farms, revealed optimism about the growth prospects for this year but respondents were also concerned about the uncertainty related to Covid-19 and the increased cost of inputs. Kenya depends heavily on the travel and tourism industry.