Kenya’s economy contracts due to Covid-19, expected to grow by 6% in 2021

Kenya’s economy contracts due to Covid-19, expected to grow by 6% in 2021

The Kenyan economy posted its first annual contraction for the first time since 1992 with 2020 growth estimated at negative 0.3 per cent.

This is according to data from the delayed 2021 Economic Survey covering the 2020 calendar year and which was published on Thursday.

The rare contraction in growth is largely a reflection of the adversity posed by the COVID-19 pandemic which hit home in March of 2020.

Only half of the key economic sectors marked any kind of growth in the period while the other half slacked in the direction of the general economy.

Accommodation and food services was the worst hit sector declining by 47.7 per cent on the back of COVID-19 restrictions which saw hotels, bars and other entertainment joints shut.

The operation of the establishments remains greatly constrained by the restriction at present which include the retention of the night time nationwide curfew which runs from 10pm to 4am.

The Education sector similarly fell by 10.7 per cent as learners around the country abandoned the 2020 academic year save for class eight and form four candidates who returned to school at the tail end of 2020.

Other key sectors to mark a decline include transport & storage which slacked by 7.8 per cent, wholesale and retail (-0.4 per cent) and manufacturing (-0.1 per cent).

The economy nevertheless still found respite from growth in five key sectors.

The construction industry for instance expanded at a double digit rate of 11.8 per cent as activity remained largely uninterrupted by the pandemic.

Human health and social workers activities expanded by 6.7 per cent as the sector took center stage in the battle against the COVID-19 pandemic with doctors and nurses turning into the countries front-line workers in the aftermath of the pandemic hit.

Meanwhile financial and insurance activities rose by 5.6 per cent albeit at a slower rate than the 6.9 per cent recorded in 2019.

Agriculture and ICT rounded off the rare fete of growth in a pandemic having expanded by 4.8 per cent respectively.

Treasury Cabinet Secretary Ukur Yatani has attributed the near six months delay in the release of the report to a trade-off between timeliness and accuracy with the pandemic having affected the collection of the key economic metrics.

At the same time, the Planning Ministry has re-based the country’s GDP adopting 2016 as its new base year.

While citing the pandemic, CS Ukur Yatani says the global health crisis continues to complicate economic activity as he hold a cautious optimistic view of 2021 economic prospects.

“We need to be alive that our economy like others around the globe face negative effects from the pandemic. We are not fully out of the woods. We don’t know the form the economy is going to take. We are not too confident about what the future contains,” he said.

Treasury is nevertheless holding out for a strong rebound in growth supported in large part by the re-opening of the majority of the economy and steady rainfall to support production in the agriculture sector.

At the same time, the economic is expected to pop on low base effects from the contraction marked in 2020.

“Last year around this time, you would think this is a deserted city. Life is now back to normal, the vibrancy is back. We are quite optimistic. Kenyans have accepted and adopted to the new kind of living and we are quite alive to the challenges posed by COVID-19,” added Yatani.

Even prior to the release of the economic data, the Kenyan economy was already in recession with growth having contracted in two consecutive quarters between April and September.

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