DIAZ: Finally some light at the end of the tunnel
Just a few months back, we feared the worst for the world economies.
As the Covid-19 pandemic ravaged through developed economies to hit at the heart of our very own, fears were rife of prolonged global economic recession.
That said, one cannot discount the devastation seen to livelihoods as the region continues to bleed jobs unabated.
Most recently, restructuring inside several private sector industries, as some of the country’s largest employing entities have been forced to reduce their staff base.
In a country featuring a high dependency ratio, the impact of a few hundred jobs hits home in the thousands with the few employed supporting the many, most of whom sit outside the labour force.
The pressure on small and medium enterprises (SMEs) has been another stress point for the country with the sector accounting for more than three-quarters of all jobs according to data from the Kenya National Bureau of Statistics (KNBS) and contributing to about one-third of GDP.
In advanced economies including the US and the European Union (EU) economies are gearing to see the worst hit on the economy since the 1930’s great depression.
The US second-quarter GDP print has already revealed the worst with the economy shrinking to its worst level on record at a minus 32.9 percent between April and June.
Economic prospects in Sub-Saharan Africa are seeing marking similar ends with the World Bank, for instance, projecting the region’s first recession in 25 years with large commodity exporters such as Angola, South Africa, Zambia and Nigeria among other nations, taking the largest hit from the pandemic.
In Nigeria for instance, the dip the demand for oil has left the country scrambling for forex exchange culminating in the devaluation of the Naira.
Zambia is meanwhile facing increased debt distresses as its reliance on copper mining falls away against thinning demand for the mineral worldwide.
In Kenya, multilateral development partners see the country’s first recession in 28 years with the World Bank predicted growth at about negative 1.5 percent at its worst and IMF seeing growth at a sub one percent.
However, not all is lost for the year as the government retains optimism based on key data points through the first six months of the year.
After seeing the worst unfold in the months of April and May, some growth is now seen rebounding into the second half of the year supported in large part by resilience in key sectors.
Last month, the Central Bank of Kenya (CBK) stood its ground backing up optimism as it observed continued perseverance in Kenya’s balance of payments.
Kenyan exports through six months to June have for instance weathered the storm to grow by 1.7 percent supported in large part by receipts from tea and horticulture sales.
While the services industry including sectors such as transport and tourism have weakened significantly, Kenya’s current account deficit is still seen settling at 5.1 percent at the end of 2020, narrowing from 5.8 percent last year.
The resumption of international flights albeit at a controlled pace is now seen as a positive spot in jump-starting the economy to lift from the depths of despair.
International flights will in simplicity transcend to a resumption in international trade to see more cargo lifted in and out of the country facilitating the earning and payment of forex exchange.
Consequently, international tourism will rebound to back up the resurgence in local tourism.
This will be welcome news for local hotels, tour and travel companies who have been itching to return to action.
Already, CBK’s market perception survey conducted in July shows 60 percent of hotels in Kenya were ready to go upon the resumption of international flights.
The reopening of hotels will mean jobs in hospitality and transport will once again return providing some much needed respite against widespread shocks.
Moreover, the Kenyan diaspora has against all odds beaten the economic hardships seen in developed economies to keep certain flow of dollars into the country coming to anchor Kenya’s foreign currency earnings.
Commercial banks have too stepped up to the plate to provide major shielding to borrowers while at the same time keeping the tap open with new loans to customers.
Under the guidance of the CBK, the banks have revealed the restructure of Ksh.844.4 billion in customer loans in four months from March to June for a minimum period of 12 months.
The loan restructures to ease pressure on Kenyans is timely in supporting the continuity of economic production anchoring growth for the year.
Both the National Treasury and the CBK have stood by their growth projections averaging at 2.3 percent as they expect a combination of monetary and fiscal measures to stop the rot in output shrinkage.
On its part, the reserve bank has kept an accommodative policy stance to support lending including a lowered benchmark lending rate to banks and a reduced cash-reserve ratio whose accessibility has been based on a proof of lending to SMEs.
The National Treasury meanwhile worked a Ksh.56.6 billion stimulus package which is now expected to work its way through the economy to provide further impetus.
Ultimately, the combination of policies if smoothly implemented will guide an eventual growth of activity, sparing Kenya from the worst of the pandemic.
While there now appears to be light at the end of the tunnel, optimism must still be guided by caution and scientific knowledge given the status of the global health pandemic lest the light at the end of the tunnel emerges as a train to knock us off the hinges.
As the trend in Covid-19 cases remain on the rise, Kenya remains in danger of subsequent disruptions to daily routines and ultimately- the prediction of an economic rebound.
With Kenya now opening up externally, public health guidelines must remain consistent and paramount in guiding the tone and discussions around a resumption to trade.
International flights have harbored a threat of a second wave of infections in countries such as New Zealand which saw new infections of Covid-19 upon the re-opening of its skies.
The government must also push to manage expectations to prevent laxity among members of the public in abiding by health protocols while remaining cognizant to subsequent bumps on the road to economic recovery.
The Ministry of Health (MOH) must, therefore, remain as the guiding light through the new normal and must be emotionless interrogating only scientific data in its guidance to the rest of the country.
The numbers of Covid-19 cases continue to spread in the region, and as trends are concerning with growing death reports, it’s now even more critical to maintain safety protocols as the situation may have the light ahead of the tunnel fade.
We need to brace and take actions to be resilient in tough times and strict measures must be expected from all of us.
Chris Diaz is a Business Leader and Director EABC. Twitter: @DiazChrisAfrica