OPTIMISTIC

Economic growth will not slump past 2.5% – CS Yatani

Agricultural sector and re-opening of the country to boost growth.

In Summary

•Yatani had in April warned that growth could possibly slump to 1.8 per cent if the effects of the virus on the economy persist.

•The World Bank projects a lower growth of 1.5 per cent in 2020 with a possibility of contracting further to 1.0 per cent.

National Treasury Cabinet Secretary Ukur Yatani
National Treasury Cabinet Secretary Ukur Yatani

Kenya's economic growth will not go below 2.5 per cent, National Treasury CS Ukur Yatani has said, even as the Covid-19 pandemic continues to ravage various  sectors.

The CS has expressed confidence that the country’s diversified economy will weather the impact of Covid-19.  

He had in April warned that growth could possibly slump to 1.8 per cent if the effects of the virus on the economy persist. Initial forecast, pre Covid-19 was placed at between  6.2 and 7.0 percen.t

 

Yatani said the agricultural sector is well on course for a good harvest, boosted by adequate rainfall. 

The partial re-opening of the country, announced by President Uhuru Kenyatta yesterday, will also boost economic activities, the CS said.

“We are firmly at 2.5 per cent. This could be the lowest that we can go,” Yatani said at  his Treasury Building office, when he launched the second voluntary national review on the implementation of the sustainable development goals, report.

“With the re-opening of the economy, we are optimistic we could realise slightly better outcome,” he noted.

The country has witnessed a slowdown in major sectors of the economy since the first case of Covid-19 was reported on March 13, with the government moving to enforce a countrywide dusk-to-dawn curfew and cessation of movement in some counties, key among them Nairobi  and Mombasa. 

Sectors hard-hit include tourism, aviation, and non-food retail sectors which have faced the highest exposure to financial distress.

Manufacturing, chemicals, media, oil and gas, mining, and agriculture are also feeling the impact of the crisis, which has hit the local economy hard.

 

Kenya Private Sector Alliance (Kepsa) data indicates that at least 5,991,768 (5.9 million) direct and indirect jobs have either been lost or workers sent home on unpaid leave as companies and businesses mitigate effects of the virus.

This is sevenfold the 846,300 new jobs created last year as per the Economic Survey 2020.

Travel and tourism are the most hit with 3.1 million jobs affected including hotel employees, pubs and restaurants, tour operators, airlines, travel agents, and their related suppliers and support services.

At least 450,000 jobs have been lost in construction and real estate, including casual labourers.

“Only 25 percent of construction sites are operating,” Kepsa notes in its report.

The sports, arts, and culture sectors has lost 400,000 jobs  along the value chain.

In the agriculture sector, at least 200,000 workers have been placed on unpaid leave and impacted directly.

Other affected sectors are public transport (126,768 jobs lost), wholesale and retail (40,000 jobs lost or at high risk) and legal (15,000 practicing advocates and 50,000 support staff adversely affected).

Some jobs have however been created in ICT as virtual meetings, research and education become a norm.

Central Bank of Kenya (CBK) has downgraded 2020 GDP growth to 2.3 per cent.

The World Bank however projects a lower growth of 1.5 per cent in 2020 with a possibility of contracting further to 1.0 per cent.

“Economic growth projection remains highly uncertain and the outcome will hinge on how the pandemic plays out internationally and within Kenya, along with policy actions taken to mitigate the situation,” the global lender notes in its latest Kenya Economic Update (KEU).

Most global economies have had a zero or negative growth projection.

Yatani yesterday said the government is keen to cushion the economy by among others moves, increasing liquidity and supporting businesses.

During his 2020/21 budget statement, he availed Sh225.7 billion including Sh172 billion in forgone taxes and Sh53.7 billion direct funding to cushion sectors of the economy.

This translates to about two per cent of GDP.

Treasury has also set aside Sh3 billion seed capital to operationalize the proposed Credit Guarantee Scheme, aimed at providing affordable credit .

The government is engaging a number of development agencies to boost the kitty.

“I further propose an allocation of Sh712 million to provide credit targeted to Micro, Small and Medium Enterprises in the manufacturing sector,” Yatani announced.

Kenya’s economic growth rate increased gradually from, 5.9 percent in 2017 to 6.3 per cent in 2018 before dropping to 5.4 per cent in 2019.