It’s an uphill task for Kenya’s economic rebound

BY ANTONY MUTUNGA

The year 2020 has been one of the worst in terms of economic growth for many African countries including Kenya. It started off on a trudge as the first quarter of the year recorded a slowdown compared to the same period last year.

According to data from the Central bank of Kenya (CBK), the economic growth had slowed from 5.5% last year to 4.9% this year.

This slowdown was followed by the COVID-19 pandemic, which caused almost all Kenyan industries to close down for at least three months. With schools closed and people advised to work from home, many people were grounded causing businesses to suffer as they experience low sales. With flights also grounded those who dealt in imports and exports were experiencing a slowdown, which caused a number to shut down.

The countries’ largest earning industry, tourism also faced turmoil, both domestic and international flights were grounded. This caused a ripple effect that saw hotels and resorts close down leading to massive job losses. As the fourth quarter of the year begins, the norm before the pandemic seems to be coming back as businesses are opening up, traffic seems to have increased across major cities and both domestic and international flights have resumed as well.

It seems that the gloom is behind us. However, there is a need for caution. It will take more time than we anticipate to reclaim our previous position. The economic growth of the country is expected to increase this quarter, which is without a doubt, although it is not expected to come close to the 5.5% that was recorded in the same period in 2019.

Many have forecast that the economic growth will slow down in 2020 and rebound come 2021. According to the National Treasury, Kenya’s economy is expected to slow down to 2.6% and then expand by 5.3% in 2021. Starting this fourth quarter, those who earn from exports in the country are expected to record a further increase in earnings.

For instance, those who rely on horticulture exports are expected to witness an increased demand. However, the increase is expected to be slow, as Europe, which accounts for a major share of the country’s flower exports, had reduced its orders following the pandemic restrictions. In addition, the high number of cases recorded in Europe saw the bloc take a financial hit, as all economies were expected to shrink in the year.

As a result, orders for horticulture reduced as many businesses and industries were not operating fully. According to Vincent Mutua, economics professor, some countries in Europe which are major buyers were hardest hit by the pandemic thus it may take time for them to recalibrate.

“Italy holds a number of major buyers in the horticulture field, with the soaring number of cases and causalities the country has faced in the past five months, it will be a while before its demand is restored fully,” he said.

The service sector is also expected to show improvement as the accommodation and restaurant as well as transport and storage sectors are expected to increase with the return to normality. The transport and storage sector were greatly affected by the pandemic as social distancing saw a reduction in total daily earnings. The accommodation and restaurant sector also faced similar challenges as curfews also caused them to close early and less traffic meant less earnings.

However, Covid-19 remains a challenge as cases are still popping up thus, the policies introduced in the transport and restaurant sectors are expected to remain for a while and those in the industry have to bear with the reduced earnings for a period.

“I don’t see the regulations that adhere to social distancing in matatus and buses being recalled, the industry will have to get used to the reduced income as they continue to carry less than before,” said Prof. Mutua.

The private sector was among the most hit sectors by the pandemic as a large number of private businesses suffered major losses resulting in lay offs and worse of closing down. This was as a result of lack of capital, access to credit and clients, although with things returning to normal, this was expected to change. “As an economy recovers, businesses take time before they are able to fully operate. The current situation is no different, the private sector will require time to recover and this will greatly depend on access to finance,” he said.

The unemployment rate, which has definitely increased due to the pandemic, will also take time to ease.

Kenya’s economic growth has faced a rough year, but it is headed back to normal. It will be a slow recovery but with investments and good infrastructure, the country, hopefully, will be better prepared for the
next catastrophe.

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