Cabinet Secretary for Devolution and Planning Anne Waiguru who presided over the launch says the marginal improvement was driven by notable growth in agriculture, wholesale and retail trade, transport and communication.
The performance was also supported by a stable macroeconomic environment, increased domestic demand and modest growth in credit.
The agricultural sector recorded a growth of 3.8 percent from 1.5 percent in 2011 due to increased production in horticulture, tea and pyrethrum.
“Value of marketed tea rose marginally in spite of a decline in production due to high prices,” she said.
The transport and communication sector recorded a growth of 4 percent compared to 4.7 percent in the previous year while the communication sub-sector expanded by 5.3 percent from a 4.3 percent.
The financial sector grew slower in 2012 to post a 6.5 percent rise compared to a 7.8 percent previously, on account of high interest incomes for commercial banks and other bank charges, increased branch network and agency banking.
Performance of the stock market improved during the year under review with the NSE 20 Share Index rising by 29 percent to 4,133 from 3,205 in December 2011.
On the other hand the labour market recorded 659,400 new jobs in 2012 representing an increase of 5.5 percent.
The bulk of the new jobs in the formal/modern sector were created in building and construction, information and communication, education and health activities. The informal sector constituted 89.7 percent of total employment created.
Annual inflation decreased from 14 percent to 9.4 percent in 2012, attributed to better food supply resulting from favourable weather conditions.
However, the country faced several challenges that slowed down the economy including the turbulent global economy, delayed long rains and weakened shilling at the beginning of the year.
Tourism earnings, which are a key source of foreign exchange earnings, decreased by 1.9 percent from Sh97.9 billion in 2011 to Sh96 billion in 2012 with international visitor arrivals decreasing by 6.1 percent from 1.8 million in 2011 to 1.7 million in 2012.
Going forward the ministry has predicted a 6 percent increase towards the end of this year due to the stable shilling, reforms in the security, governance and justice sectors and increased investor and business confidence due to peaceful March 2013 elections.