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World Bank sees Kenya economy growing at 5pc

BUSINESS
By Frankline Sunday | October 7th 2021

 

World Bank logo [Courtesy]

Kenya’s economy is set to grow by five per cent this year on the back of improved construction and ICT sectors as well as the continued rollout of Covid vaccines.

This is according to the World Bank’s latest report that indicates the country’s economy is set to rebound faster than sub-Saharan Africa’s growth average of 3.5 per cent this year.

“Economic activity in Kenya is projected to rebound from -0.3 per cent growth in 2020 to 5.0 per cent in 2021, and it is expected to grow at an average of 4.8 per cent in 2022–23,” said the global lender in its latest edition of the Africa Pulse report. “This positive outlook reflects improvements in the construction, education, information and communication, and real estate sectors,” said the report.

According to the World Bank, Kenya’s economic rebound could have been faster this year had it not been for the third wave of the Covid-19 pandemic that was fuelled by the Delta variant.

“The restrictions that were imposed impacted particularly the external sector in Kenya, resulting to a decrease in exports of coffee and tea; imports rose, which then exerted pressure on the current account, widening the deficit,” explained the bank.

World Bank’s estimate is below the National Treasury’s projection that the economy would rebound to above six per cent in the medium-term, supported by a turnaround in trade, increased agricultural output and broad recovery from the Covid-19 pandemic around the world.

“Going forward, we expect revenue collection in the 2021/2022 financial year to spring back, buoyed by the improving economic environment, tax policy and revenue administration measures ?put in place,” said Treasury Cabinet Secretary Ukur Yatani while presenting the latest Budget Policy Statement in Parliament earlier this year.

Data from the Kenya National Bureau of Statistics (KNBS) indicates that inflation rates stood at 6.9 per cent in September, an increase from 4.1 per cent recorded at the beginning of this year.

The inflationary pressure was driven by the increased cost of food, fuel and electricity, with most items recording a double-digit increase in prices compared to last year.

However, recent economic data from other studies in the private sector point to an improvement in fortunes across major sectors, with a projected rebound in jobs in the coming months.

“Business conditions in the Kenyan private sector economy improved for a fourth straight month in August,” explained Stanbic Bank in its latest Purchasing Managers Index (PMI) released last month. “Sales rose in four of the five monitored sectors, but were unchanged among manufacturing firms,” said the Stanbic.

“According to survey respondents, the recovery in market activity after the Covid-19 lockdown drove an improvement in cash flow and customer demand.” The World Bank, however, cautioned that financial challenges arising from Covid-19 intervention efforts across the continent could leave distressed countries with little room to realise economic recovery.

“As of August 2021, sub-Saharan African countries have raised $9 billion (Sh990 billion) in Eurobonds - an amount that is higher than the $5.9 million (Sh643 million) raised throughout 2020,” explained the bank.

The report further indicates Kenya needs to invest Sh2.9 trillion in climate-smart infrastructure in the short to medium term to mitigate the adverse impact of climate change.  

“The long-run impact of climate change on economic activity varies widely across African countries,” said the World Bank.

“For global warming of three degrees Celsius by 2100, GDP losses could be as low as 3.4 to 4.4 per cent (Namibia and South Africa), with a median loss of 7-8 per cent (Kenya, Madagascar and Rwanda).”

According to the Economic Survey 2020, the size of Kenya’s economy contracted for the first time in two decades last year following a tumultuous period in which the Covid-19 pandemic killed businesses and rendered thousands jobless. It showed that the economy measured using gross domestic product (GDP), or the size of the national cake, shrunk by 0.3 per cent last year with the value of goods and services produced amounting to Sh8.71 trillion compared to Sh8.74 trillion in 2019.

The report also showed that the number of those in employment decreased to 17,405,200 from 18,142,700 in 2019. A big chunk of those who lost their jobs were those in the informal sector.

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