World Bank sees strong growth for Kenya in 2021
The World Bank Group expects Kenya to lead the Sub-Saharan region out of the economic shackles of 2020 in the New Year.
In its early predictions for 2021, the multi-lateral lender sees the Kenyan economy growing at 6.9 per cent, the highest rate in the region, from a projected 2020 contraction by one percent.
Regionally, growth for the year is expected to only rebound moderately to 2.7 per cent before firming up to 3.3 per cent in 2022.
“While the rebound in private consumption and investment is forecast to be slower than previously envisioned, export growth is expected to accelerate in line with the rebound in economic activity among major trading partners,” the World Bank stated.
“The sluggish recovery reflects persistent outbreaks in several economies that have inhibited the resumption of economic activity, particularly in service sectors such as tourism.”
Previously, the World Bank tipped Kenya’s economic diversification away from any one sector to build resilience in growth.
Nevertheless, the institution sees Kenya in recession at the end of 2020 with the local economy being weighted down by restriction measures to contain the COVID-19 pandemic.
Kenya’s economy shrunk for the first time in 12 years in June 2020 as tough containment measures including the closure of schools and hotels severed the education and services sector.
During the same period, the economy shed an estimated 1.7 million jobs as businesses caved to the strain of restrictions.
In contrast, Sub-Saharan economies contracted by 3.7 per cent in 2020 while individual incomes were severely hit as per capita income declined by 6.1 per cent, the deepest contraction on record
The impact of the subsequent easing of the containment measures is however yet to be put on weighing scales with the government yet to publish quarter three economic statistics.
On the flipside, the year presents more downside risks for, not just Kenya but, the region with the combination of debt and expected hurdles in vaccine distribution tilts the outlook.
“Although there has been substantial progress in COVID-19 vaccine development, widescale vaccine distribution in Sub-Saharan Africa is likely to face many hurdles. These include poor transport infrastructure and distribution systems, weak health system capacity to implement largescale vaccination programs, and outdated or insufficient cold storage systems to preserve vaccines,” the World Bank added.
Meanwhile, debt distresses are expected to expand further this year elevating concerns on debt sustainability.
The combination of greater revenue needs alongside constrained government revenues is expected to lead to wider budget deficits whose fixing is largely undertaken through higher borrowing.
Kenya has for instance been nearing the red line as the stock of public debt (Ksh.7.1 trillion in September 2020) nears the Ksh.9 trillion ceiling with the Treasury having borrowed more than Ksh.1 trillion in the past 12 months.