ECONOMIC SURVEY

Kenya's economy withstands Covid shocks as GDP hits Sh10.7tn

Nominal gross domestic product was Sh10.25 trillion in 2019.

In Summary
  • Kenya has gained six positions as one of Africa's big boys in terms of GDP since President Uhuru Kenyatta took over the reins in 2013. 
  • The Covid-19 crisis saw economic growth contract by 0.3%, lowest since 1992

Kenya's economy defied Covid-19 pressure to add almost half a trillion shillings to its gross domestic product in market price in 2020.

Data from the delayed 2021 Economic Survey covering the 2020 calendar year published yesterday shows the nominal GDP grew to Sh10.75 trillion last year compared to Sh10.25 trillion in 2019.

Although there was an increase of Sh498 billion, it was the slowest growth in two decades, an aspect attributed to the Covid-19 crisis that saw economic growth contract by 0.3 per cent during the year under review.

According to the National Treasury, without Covid-19 and related containment measures, the economy would have grown by Sh1.35 trillion. This is equivalent to the 6.2 per cent expected growth in 2020.

"This is, however, not regrettable considering that had we not shut down, we would have lost 800,000 lives to corona in one year or 2,564 lives daily," National Treasury CS Ukur Yatani said. 

The five per cent growth in nominal GDP pushed Kenya to the sixth-largest economy in Africa and the third biggest in sub-Sharan Africa after Nigeria and South Africa. 

Kenya has gained six positions as one of Africa's big boys in terms of GDP since President Uhuru Kenyatta took over the reins in 2013. 

CONTRACTED ECONOMY

Even so, just like any other economy in the world, Kenya took a beating from the pandemic, with key economic factors like inflation rising to a three-year high, a general drop in trade and high unemployment. 

The economy posted its first annual contraction for the first time since 1992, with almost five sectors of the economy registering negative growth. 

Accommodation and food services were the worst hit, the sector declining by 47.7 per cent on the back of Covid-19 restrictions, which saw hotels, bars and other entertainment joints shut.

The operation of the establishments remains greatly constrained by the restriction at present owing to the retention of the nighttime nationwide curfew that runs from 10 pm to 4 am.

The Education sector similarly fell by 10.7 per cent as learners around the country abandoned the 2020 academic year save for Standard 8 and Form 4 candidates who returned to school at the tail end of last year.

Other key sectors to mark a decline include transport and storage, which slacked by 7.8 per cent; wholesale and retail (-0.4 per cent), and manufacturing (-0.1 per cent).

Manufacturing was hurt by a general slowdown in economic activities, largely due to measures instituted by the government to curb Covid-19.

These measures resulted in reduced demand for products manufactured locally and internationally, the Economic Survey 2021 released yesterday indicates, with the sector's real gross value added contracting by -0.1 per cent, from a growth of 2.5 per cent in 2019.

Similarly, the number of local employees in Export Processing Zone enterprises dropped by 7.7 per cent to 55,736.

Total sales by EPZ enterprises increased by 4.3 per cent to Sh80.5 billion last year, while imports contracted by 7.5 per cent to Sh36.8 billion, the survey suggests.

“The value of export of articles of apparel under African Growth and Opportunity Act decreased by 8.3 per cent to Sh42.3 billion in 2020 mainly because of inadequate supply of raw materials and the market lockdown in the USA,” it states.

Kenya's total volume of trade during the year dropped to Sh2.29 trillion out of which the value of imports was Sh1.64 trillion, while that of total exports was Sh640 billion.

JOBS LOST

According to the survey data, over 740,000 jobs were lost in Kenya to the Covid-19 pandemic. 

Speaking when releasing the Economic Survey 2021, Yatani said the number of employed people fell to 17.4 million at the end of 2020 from 18.1 million.

“Wage employment in the public sector increased. Informal sector employment contracted, 2.9 million jobs were reported in the formal sector in 2020,” the report says.

Wage employment in the private sector declined by 10.0 per cent from 2,063,000 jobs in 2019 to 1,856,000.

Within the public sector, wage employment increased from 865,200 in 2019 to 884,600 in 2020.

According to the report, the total employment outside small-scale agriculture and pastoralist activities contracted by 4.1 per cent to 17.4 million last year.

Eighty-three per cent of recorded employment last year was in the informal sector, while 2.9 million jobs were reported in the formal sector.

Informal sector employment is estimated to have contracted to 14.5 million jobs compared to 15.1 million jobs in 2019.

RELIEF

The economy, nevertheless, still found respite from growth in five key sectors. The construction industry, for instance, expanded at a double-digit rate of 11.8 per cent as activity remained largely uninterrupted by the pandemic.

Human health and social work activities expanded by 6.7 per cent as the sector took centre stage on the war on Covid-19, with doctors and nurses turning into front-line workers.

Meanwhile, financial and insurance activities rose by 5.6 per cent, albeit at a slower rate than the 6.9 per cent recorded in 2019.

Agriculture and ICT rounded off the rare fete of growth in a pandemic, each having expanded by 4.8 per cent.

The mobile money transfer value hit Sh5.2 trillion. This means that in 2020 Kenyans transacted more on mobile phones than the combined GDP of Uganda, Rwanda, Burundi and South Sudan ($49 billion).

This year, Kenya expects a strong economic recovery as the coronavirus vaccination programme gains momentum and the service industry rebounds from a brutal Covid fallout.

REBASE

The country rebased its economy for the seventh time since Independence during the year under review to give a clear picture of its economy based on the latest data set. 

The exercise is meant to include new activities in the computation of the GDP.  

“The revised and rebased national accounts has resulted in an increase in the size of the GDP, increase in per-capita income, change in the production structure and revised GDP growth rates among other changes,” KNBS director general Macdonald Obudho said.

With Kenya rebasing its GDP, Renaissance capital expects an upward revision but not as big as the 25 per cent seen in 2014 because a sizeable share of the informal economy was incorporated then. And as the economy gets bigger, the percentage upside is likely to get smaller.

Kenya also rebased its economy in 1957, 1967,1976,1985, 2005 and 2014. The latest rebase factored in data collected during the 2009 national census.