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2019: A bad year that spilt over into 2020

BUSINESS
By Peter Theuri | May 3rd 2020
NSE market watch board at Nairobi securities Exchange in Nairobi. [Jonah Onyango/Standard]

While 2020 is by all indications likely to be the worst year for the global economy in history in the wake of the coronavirus pandemic, 2019 will probably come a close second.

For starters, the global real Gross Domestic Product (GDP) recorded a decelerated growth of 2.9 per cent last year compared to a growth of 3.5 per cent in 2018, according to new official figures.

In Kenya, the real GDP is estimated to have expanded by 5.4 per cent in 2019, down from 6.3 per cent in 2018.

The agriculture, forestry and the fishing sector, which contributes around 26 per cent to the GDP, registered one of the biggest declines from a six per cent growth in 2018 to 3.6 per cent last year.

According to the Economic Survey 2020, this was attributable to the delay of the long rains and the fact that when the rains finally came, they were torrential and left a trail of destruction.

Late in the year, a wave of locusts invaded the region, decimating crops in regions that were trying to recover from the ravages of drought. Any recovery hopes this year were dashed in the first quarter by the coronavirus pandemic.

As such, estimates of the growth of the economy have had to be revised downwards, with economies globally suffering an unprecedented slowdown.

However, in spite of the gloom of 2019, some positives were witnessed.
For instance, Gross National Income (GNI) grew by 9.1 per cent from Sh8.75 trillion in 2018 to Sh9.54 trillion last year.

Similarly, Gross National Disposable Income (GNDI) grew by nine per cent to stand at Sh10.08 trillion in 2019. The GDP per capita, Kenya National Bureau of Statistics (KNBS) said in the report, increased from Sh191,789 in 2018 to Sh204,783 last year.

In the financial sector, the Central Bank of Kenya (CBK) reviewed the Central Bank Rate (CBR) downwards from nine per cent in July 2018 to 8.5 per cent in November 2019.

This led to an easing of monetary policy. Similarly, the capping of bank interest rates previously enshrined in section 33B of the 2016 Banking Act was repealed in November through the enactment of the Finance Act, 2019.

All this was to give the economy a much-needed boost and allow more space for lending, especially to Small and Medium Enterprises (SMEs).

The Nairobi Securities Exchange (NSE) 20-Share Index, KNBS said, dropped to 2,654 points as of December 2019 from 2,834 points a year earlier as companies waded through troubled waters.

Many blue-chip companies collapsed, with others scaling down to maintain operations.

During the review period, total exports declined by 2.9 per cent, with the value of exports rising to Sh596.7 billion, while total imports increased by 2.4 per cent to Sh1.81 trillion over the same period.

With the coronavirus aftershocks affecting the whole world, the country could be forced to come up with means of producing some goods locally.

KNBS said tea production decreased by 6.9 per cent to 458.5 thousand tonnes last year, while sugarcane production decreased by 12.5 per cent to 4.6 million tonnes over the same period.

This was in reaction to factors such as delayed rainfall and the perennial mismanagement of these sectors in agriculture.

The reduction in the production of tea came in spite of the area under tea increasing by 15 per cent from 234,300 hectares in 2018 to 269, 400 hectares in 2019. Earnings from exports of fresh horticultural produce, meanwhile, decreased for the first time by 5.9 per cent from Sh153.7 billion in 2018 to Sh144.6 billion last year. This was attributable to lower prices offered in the international market. The export quantities increased slightly by 1.8 per cent from 322,600 tonnes in 2018 to 328, 300 tonnes in 2019.

In 2019, wind power increased more than four-fold to 1,562.7 GWh (Gigawatt hours) compared to 1,313.3 GWh for thermal oil.
As a result, total electricity generated (including imports) expanded by 3.9 per cent to 11,620.7 GWh.

Total installed electricity capacity, on the other hand, increased from 2,711.7 MW(megawatts) in 2018 to 2,818.9 MW last year. The report said the addition of the Olkaria V geothermal power plant to the national grid in 2019 expanded the country’s geothermal capacity by 25.0 per cent to 828.4 MW.

Under the rural electrification programme, the number of customers connected expanded by 5.8 per cent to 1,409,256 in 2018/19 from 1,332,209 in the 2017/18, most of them in domestic and small commercial categories.

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