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Key economic regrets of 2019

By XN Iraki | December 31st 2019 at 13:00:00 GMT +0300

Stranded passengers waiting to board a vehicle at North Rift shuttle Nairobi,despite the increment of fair on 21st December 2019.

We are looking forward to the end of 2019 as a boring speaker on the stage.

We clap for his exit, yet he thinks it was because of his good speech. We would call 2019 the year of paradox. Floods apart, it was a wet year. By extension, we had muted inflation because of the good food supply.

The exchange rate was stable. The Gross Domestic Products (GDP) growth was sustained, expected to hit 5.7 per cent in 2019, says World Bank.

But the Nairobi Securities (NSE) index has been declining, while money supply growth has slowed. Could this be explained by demonetisation of the Sh1,000 old note?

Most of our economic fundamentals appear right. Even the political war drums fell silent courtesy of the handshake. Yet from the Central Business District to the villages and hamlets, everyone says there is no money.

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A visit to a five-star hotel over the festive season confirmed to me that it is not just those on the lower echelons of the society saying there is no money, the rich, it seems, are also crying.

The anticipated Christmas rush was muted. Except for a small traffic jam near an odd name of a town, Soko Mjinga, the traffic from Nairobi to Nakuru was not that heavy.

The alternative route through Njabini-Ol Kalou-Ndundori was almost empty on Christmas Eve. We, however, cannot discount the fact that Kenyans are very unadventurous. Next to Soko Mjinga is Uttam police station. Uttam?

Muted Christmas activities are the best evidence that the year was not good economically despite solid economic fundamentals. Interestingly, the first half of the year was very vibrant, then things just went south. Why?

The bad economic times cannot be explained using the graphs and esoteric equations favoured by economists. We can use the latest kid on the block - behavioural economics. Our behaviour and feelings explain our economy better than data. The endless discussion of economic negatives has finally affected our consumption and investment patterns. One negative is debt.

Without hard data, we have scared Kenyans to believe we are on a precipice, almost Greece like situation.

There are even self-made experts advising us on how not to spend.

The fear of economic meltdown in a country that loves pessimism and sharing it has affected our consumption and investment patterns negatively.

Our persistent complaint about the debt has had unintended consequence; the government has focused more on raising the tax revenues - too aggressively.

That has made many investors and entrepreneurs hold back many decisions that involve spending or investing. The involvement of police in purely economic affairs has left many entrepreneurs shaken.

High profile graft cases have closed the taps to “free” money that float around giving an impression there is a lot of money.

We see that around polls-time.

Some fear such high profile cases will drive corruption underground and to lower echelons in the public and private sector, where it is hard to detect.

A good example is; who cares if a policeman picks Sh50 from every matatu? But do your math. Kenya has about 100,000 matatus. The Sh50 translates to Sh1.8 billion a year! What can you do with that money?

The end of opposition in the political system where all politicians are now in one basket means the checks and balances have been weakened.

Everyone is rushing to be counted with an eye on next polls.

This has economic consequences, competition leads to better ideas. Without competition, old tired ideas persist.

Add the feeling of exclusion from the high table for the vast majority of Kenyans. Have excluded and unhappy Kenyans “revenged” by working less hard or feeling things are really bad?

How can the economy be depressed when the Building Bridges Initiative (BBI) report is promising a new beginning for the 56-year-old nation?

Does the economic pessimism mean Kenyans do not believe in its promises? Was there a spike in the NSE index when the report came out?

Many Kenyans are angry over the feeling that government has “its owners” going by high profile political appointments in national and county governments. Nowadays you get rewarded if you fail to win political posts through elections. The term political failure seems to have been retired.

The same old faces may have made many Kenyans feel subdued.

Add the unpaid bills and economic players feel helpless. If governments cannot pay you, who do you appeal to?

Still not convinced why the year was bad? If citizens are unhappy, they often spend less or on wrong priorities like cheap booze.

The economic slowdown is more about our feelings and behaviour than the fundamentals. Unfortunately, such feelings, though real, are hard to model.

There have been no external economic shocks this year. Clearly, most economic problems facing us are internal. Recall interest cap?

The year will end, but on a low note. How do you feel about the year? Some argue that any year ending with nine is unlucky. Symmetrical years like 2020 are better.

Next week we look at economic prospects of the symmetrical 2020.

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