The reduction in household and business spending during the coronavirus pandemic will have the biggest impact on economic growth, a new report has revealed.
The study by McKinsey & Company dubbed 'Tackling COVID-19 in Africa' revealed that household and business spending is likely to drop by about 50 per cent as the virus continues to spread across the country.
"The biggest impacts in terms of loss to GDP are reductions in household and business spending," the report stated.
This, as more firms send home workers on unpaid leave while others resort to laying off staff due to the impact of the coronavirus.
As per the report, disruption to supply chain for key inputs in machinery and chemicals (about 30 per cent) and tourism (about 20 per cent) will also negatively impact the country's projected growth.
Last month, the Central Bank of Kenya revised its 2020 economic growth forecast to 3.4 per cent from the initial 6.2 per cent projection.
The report by McKinsey however further downgrades this, taking into account the locust invasion that hit Kenya earlier on.
"Kenya is facing a likely economic contraction. Under the contained-outbreak scenario, GDP growth could decline from 5.2 per cent (after accounting for the 2020 locust invasion) to 1.9 per cent," it says.
This represents a $3 billion (Sh317 billion) reduction in the country's gross domestic product.
"In scenarios in which the outbreak is not contained, Kenya’s GDP growth rate could fall to -5 per cent, representing a loss to GDP of $10 billion (Sh1.06 trillion)," the report stated.
Official data from the World Bank and projections from Trading Economics shows Kenya's GDP was valued at Sh8.95 trillion.
Meaning, in the worst case scenario, if the COVID-19 outbreak in the country is not contained, this could drop to Sh7.89 trillion.
