UPWARD REVISION

IMF to revise Kenya's economic growth upwards this year despite pandemic

An earlier forecast had predicated a contradicting economic performance.

In Summary

• The lender now expects an “upward revision” of its June forecast for the economy to shrink by 0.3 per cent in 2020.

• The financial agency on Wednesday said the change in outlook is supported by an improvement in several economic indicators.

President Uhuru Kenyatta.
President Uhuru Kenyatta.
Image: PSCU.

The International Monetary Fund forecasts Kenya’s economy to grow upward despite most industries in the country being hit hard by the Covid-19 pandemic.

An earlier forecast had predicated a contradicting economic performance.

The financial agency on Wednesday said the change in outlook is supported by an improvement in several economic indicators.

 
 

According to an article by Bloomberg, the lender now expects an “upward revision” of its June forecast for the economy to shrink by 0.3 per cent in 2020.

"We have seen an upturn in most activity indicators,” IMF’s resident representative for Kenya, Tobias Rasmussen said at a virtual investor conference organized by Renaissance Capital. 

"Looking at the numbers coming out of Kenya it’s fair to say that the outruns here have so far been better than what we at the IMF expected."

Kenya’s flower industry which saw export earnings increase in the period through July is among some of the country's industries that have done well this year.

Renaissance Capital forecasts Kenya’s economy to grow at 1.5 per cent in 2020 driven by superior agricultural yields because of good rains, according to Yvonne Mhango, the sub-Saharan Africa economist at the investment bank.

Present in the webinar, Central Bank of Kenya Deputy Governor Sheila M’Mbijjewe noted that Kenya’s economy remains resilient due to its diversification and low dependency on natural resources for export.

"There are good signs of recovery, these are visible. These are all positive, but the uncertainty remains," she said.

 
 

This comes as the government on Wednesday admitted to the country's finances being in distress.

On Monday, Interior CS Fred Matiang'i revealed a cash crunch in the Jubilee administration that has turned to borrow for survival amid low revenue collection. 

Low revenue collection, ballooning debt and the economic challenges of Covid-19 have plunged Kenya into a cash crunch, with all indications clear that the government is struggling. 

Matiang'i hinted at a looming pay cut for civil servants in a desperate move to ease pressure on recurrent expenditure, weighed down by dwindling domestic revenue collections. 

In an interview with a local TV station, Matiang'i admitted that although no one loves a pay cut, the government is facing a tough situation.

"All of us are going to be called upon to accept these extraordinary measures because we are dealing with extraordinary circumstances. If it comes to that (pay cut) so be it," Matiang'i said. 

He added that some of the major development projects are going to be affected as the government cuts back on spending.