Coronavirus-hit economy to grow at 2.5pc, Treasury CS says
Lewis Njoka @LewisNjoka
Kenya’s economy expanded at a slower 5.4 per cent last year compared to 6.3 per cent in 2018 despite generating 846,300 jobs, National Treasury Cabinet Secretary Ukur Yatani said yesterday.
The sluggish growth was as a result of poor performance by the agriculture, manufacturing and building and construction sectors, according to this year’s Economic Survey, which was released in Nairobi yesterday.
The survey, which painted a gloomy picture of Kenya’s economy, had more bad news with a projection that the economy will grow at a measly 2.5 per cent this year, on the back of poor performance last year and a depressed global economy that has been hard hit by the coronavirus pandemic.
Agriculture, which accounts for more than a third of Kenya’s Gross Domestic Product (GDP), slowed to 3.6 per cent in 2019, compared to six per cent the previous year according to the survey.
Building and construction performance dipped by 6.4 per cent compared to a growth of 6.9 per cent in 2018, largely on reduced activity on the Standard Gauge Railway (SGR) project.
Similarly, growth in the manufacturing sector, which is among the pillars of President Uhuru Kenyatta’s Big Four agenda slowed down to grow at 3.2 per cent from 5.3 per cent the previous year.
However, the financial and insurance sectors posted an improved growth of 6.6 per cent compared to 5.3 a year earlier, as the sector roared back from the interest rates capping regime debacle.
Yatani now estimates that on the back of the Covid-19 pandemic, and a depressed global economy, the projected 6.3 per cent growth is not feasible, meaning the country is entering its lowest trajectory since 2008 when it registered a 0.2 per cent rise due to post-election violence.
Since then, the country’s GDP growth has remained above 4 per cent except in 2009 (3.3 per cent) when the economy was beginning to recover from effects of the 2007/2008 slow down.
The CS said the expected 6.3 per cent was no longer feasible with Treasury having revised its revenue estimates downwards.
“Tomorrow, we will go to the National Assembly to give new projections for both economic growth and revenue collections,” he said yesterday.
The minister said the government was looking for ways to curb the intensity of the pandemic’s effect on the economy with the recently tabled supplementary budget proposing several cuts on development spending.
With reduced economic growth, there will be fewer jobs available for Kenyans with businesses likely to post less profits compared to previous years.
Yesterday’s projections follow a recent report which estimates that Kenya’s GDP growth will reduce by about Sh317 billion ($3 billion) in the best case scenario and Sh1 trillion ($10 billion) at the worst, due to Covid-19.
Informal sector workers are likely to be affected most by the poor economic growth with reports indicating that Small and Medium Enterprises (SMEs), the main source of income for this segment of the population, will be hit the hardest.
Already, informal sector workers have lost more than a half of their weekly income forcing many to go into debt and others to move to the rural areas, according to a report by the United States International University (USIU) Africa and Network of Impact Evaluation (Niera).
“Thirty days after the occurrence of the crisis, incomes of the workers reduced by 51.2 per cent, greatly affecting those in peri-urban counties and those more than 53 years,” said the report.
Other sectors that have been hard hit by the coronavirus pandemic include tourism and hospitality as well as floriculture.
Treasury’s projection is more optimistic than that of the International Monetary Fund (IMF) which recently projected that Kenya’s economy would grow at a paltry one per cent this year.