CBK says economy recovered in the first half of 2021

Central Bank of Kenya governor Patrick Njoroge during an interview on October 26, 2020. [David Gichuru,Standard]

By Dominic Omondi

Kenya’s economy shook off the adverse effects of Covid-19 to post recovery in the first half of the year, the Central Bank of Kenya (CBK) said yesterday.

CBK said the rebound was supported mainly by the strong performance of construction, information and communication, education and real estate sectors, with the taxman meeting its tax collection target for the financial year that ended in June.

“The economy is expected to rebound in 2021, supported by the continued reopening of the services sectors including education, recovery in manufacturing, and stronger global demand,” said the Monetary Policy Committee (MPC), CBK’s highest decision-making organ.

MPC has for the ninth consecutive time retained the Central Bank Rate - the benchmarking rate at which the apex bank lends to financial institutions at seven per cent.

Besides improved tax collections, banks also reduced their percentage of bad loans or non-performing loans to 14 per cent - reflecting a pickup in economic activities that have seen borrowers resume servicing their loans.

Bank profitability also rose sharply in the first four months compared to the same period last year. The recovery comes at a time when the country is still grappling with the pandemic.

There were also efforts to vaccinate the population to enable the society and economy to return to normalcy.

Nonetheless, respondents in the MPC’s Private Sector Market Perceptions Survey, CEOs Survey, and the Survey of Hotels, were optimistic about economic growth prospects for 2021, citing vaccinations and easing of Covid-19 containment measures.

MPC in a statement signed by its chairperson CBK Governor Patrick Njoroge (pictured) raised concerns about continued uncertainties over the pandemic, increased taxes and heightened political activity.

The Kenya National Bureau of Statistics is yet to release the economic growth figures for 2020, citing failure to get some information from some industries due to the effects of Covid-19.

The economy contracted in the second and third quarters of last year, with the National Treasury estimating that it grew by 0.6 per cent in 2020.