Kenya’s economy will have a strong rebound in 2021, growing by
about 5.2 percent, the World Bank projects in a new Economic Update.
The
multilateral lender pegs the recovery on expected rise in private
sector investment and improved credit access in the post-crisis period.
Favourable
weather conditions are also expected to boost agricultural performance,
improving food processing activity, increasing exports and
strengthening household incomes, the institution said.
“We
expect a strong pickup in 2021 of about 5.2 percent and here the main
assumption is that investor confidence will be restored soon enough
after containment of Covid-19,” said World Bank’s senior economist Peter
Chacha in a virtual briefing.
GOVERNMENT POLICIES
He added that the quick recovery will be dependent on the measures and policies the government adopts to contain the pandemic.
Covid-19 global pandemic containment measures have had a
debilitating impact on the Kenyan economy with the aftershocks expected
to reduce growth this year.
The measures, including
dusk-to-dawn curfew, travel restrictions and closure of entertainment
spots, are expected to affect both production and consumption across the
economy.
A huge impact has already been reported in
service sectors such as transport, retail trade, tourism, events,
leisure, manufacturing and construction.
Tuesday,
Treasury Secretary Ukur Yatani said the economy will grow at a much
slower pace of between 1.8 percent and 2.5 percent this year, from an
earlier six percent forecast. Mr Chacha had a more conservative outlook,
projecting a baseline growth rate of 1.5 percent this year.
“Because
of high uncertainty, we acknowledge the fact that the pandemic may not
be contained until the second half of 2020. And this may link to more
prolonged disruption of activity. And so the impact on economic
activities could fall further to a recession of about 1 per cent,” he
added.
LAYOFFS
According
to the World Bank, well targeted policies in response to Covid-19 may
help reduce the falling demand and massive layoffs, hence support
economy’s resilience.
“Ensuring that vulnerable
households have cash-on-hand, workers continue to receive salaries —
even when temporarily laid-off-and ensuring that firms have enough cash
flow (to pay workers and suppliers) and avoid bankruptcies, as well as
supporting the financial system to avoid a credit crunch, are all
important,” it stated.
Fiscal deficit is expected to
expand to eight percent from 6.3 percent owing to tax breaks the
government has taken to cushion Kenyans from adverse effects of the
crisis with this gap expected to be closed by additional net domestic
financing.
The Word Bank also projects the remittances
to come under pressure with the bulk coming from the UK (34 percent) and
US (30 percent).
Kenya recorded remittances of Sh304.4
billion ($2.9 billion) in 2019 representing 2.9 percent of GDP and
having doubled since 2014.
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