Inflation might hit an all-time high of 11 per cent as a result
of the prolonged drought earlier in the year, the Parliamentary Budget
Office has warned, signalling tough times for Kenyans already reeling
under high cost of living.
Last month, inflation
reached a 19-month high of 6.58 per cent, eroding the purchasing power
of consumers who now need an additional Sh658 to buy a basket of goods
that last year cost Sh10,000.
FORMAL JOBS
The grim report also comes against the backdrop of the data released by the Kenya National Bureau of Statistics (KNBS), which indicated only 78,400 new formal jobs were created in the economy last year, compared to 114,400 in 2017.
The grim report also comes against the backdrop of the data released by the Kenya National Bureau of Statistics (KNBS), which indicated only 78,400 new formal jobs were created in the economy last year, compared to 114,400 in 2017.
This was the slowest pace of formal job growth since 2012, when the economy churned out 75,000 official jobs.
“The
economic growth projection of 6.2 per cent for 2019 appears to be
premised on weak fundamentals,” warns the document titled ‘Unpacking the
Estimates of Revenue and Expenditure for 2019/20 and the Medium Term’.
The
document, prepared by the Parliamentary Budget Office, notes that the
Treasury pegged the 2019 economic growth projections on stable weather
despite the already “very apparent poor performance of the
March-April-May long rains season”.
It also hinged its 2019/2020 budget growth forecast of 6.2 per cent on a single digit inflation of 5 percent.
“Given
a much delayed onset of the long rains, the amount of rainfall for most
parts of the country is currently below 55 per cent of what is normally
experienced. According to forecasts, the rains are likely to peter out
by end of May 2019 and most of the country will receive below average
rainfall by end of the season,” the document reads.
VIRULENT STRAIN
The
delayed rains adversely affected the planting season and a
below-average rainfall performance is likely to result in lower food
production, inadequate fodder for livestock and inadequate water and
electricity supply, presenting significant challenges in terms of the
food and inflation outlook.
The Kenya Agricultural and
Livestock Research Organisation (Kalro) has also recently expressed
fears of a worsening invasion of armyworms because of the scarcity of
rains, which creates a thriving environment for the pests.
The worms were responsible for the fall in maize production by about five million bags in 2017.
The
fall armyworm, a virulent strain that devastates acres of land in no
time, has already been reported in Uasin Gishu, Trans Nzoia, Nandi,
Narok, Busia, Kisumu, West Pokot and Elgeyo-Marakwet counties.
“There
is a likelihood of higher inflation on account of food scarcity and
higher electricity prices, reduced income for the majority of rural
dwellers who rely on income from agricultural activities, reduced
agro-processing output and a possible widening of the current account
deficit due to reduced agricultural exports. If the current trend
persists, inflation is likely to reach 11 per cent by close of December
2019,” the budget office warns.
The document also
blames a weak global economic outlook for a possible downturn. Coffee
and tea — two of Kenya’s most important experts — are already fetching
lower prices in the commodity market.
DIM VIEW
Kenya recently inked a lucrative deal to export its avocados to China. The budget office now warns such deals maybe in jeopardy.
“The
ongoing trade tensions between the United States and China may not
augur well for Kenyan commodity exports to China and the US, which are
key inputs for either Chinese exports to US markets or US exports to
China, especially if these products are targets for trade wars between
the two countries,” the document reads.
Despite its
lower performance compared to other countries and government’s lip
service to it, agriculture’s contribution to Kenya’s Gross Domestic
Product (GDP) has continued to rise since 2013, hitting a high of 1.35
last year, which represented 21 per cent of the overall growth of the
GDP.
The
other 10 sectors — real estate, transport and storage, construction,
education, finance and insurance, manufacturing, information and
communication, wholesale and retail trade, mining and quarrying as well
as accommodation and food service — shared out the remaining 79.
The
budget office also holds a dim view of the implementation of the Big
Four agenda sectors of agriculture, manufacturing, housing and health,
warning the Sh450 billion allocated to them may not be sufficient.
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