It was a year of mixed fortunes, gains and losses for the economy
By Patrick Muinde
| Dec 31st 2021 | 5 min read
The world of economics and money is not a caricature of abstract theories or works of fiction. In developed financial or capital markets, a minute means trades worth billions of dollars, especially in highly digitised securities markets. For millions of the world’s populace, the rising of the sun in the east and its setting in the west is an uneventful routine they get accustomed to. That routine soon turns into weeks, months, years, decades and eventually centuries.
However, in economics, every single passing second has significant allocative and/or distributive impact on wealth at individual or macroeconomic level. For instance, the Dow Jones Industrial Average (DJIA) dropped more than 1,000 points in 10 minutes on May 6, 2010. In those short minutes, the stock market wiped out value worth over US$1 trillion (Sh113 trillion at current exchange rates).
Other events were registered on August 22, 2013 when the Nasdaq trading was halted for more than three hours. On May 18, 2012, on the debut of Meta (formerly Facebook) Initial Public Offering, trading was halted for about 30 minutes. In those 30 minutes, it is estimated that over US$500 million was lost. While these numbers may sound out of place to our small economy, they represent the reality of the world economy on a daily basis.
We are part of that world economic system. Whether we like it or not, the consequent impacts have a trickle down effect into our economic activities. This reality should prick our national conscience into the complexity of the modern world of economics. Both social and political events, and leadership choices at the national and county levels are interwoven in a complex network of activities that account for the national economy. Consequently, the sum total of those isolated events and/or actions dictate whether we move forward, stagnate or move backwards.
It is for this reason that it is important for us to take stock of events that shaped our economy in 2021. An honest and candid reflection ought to serve as lessons learned and mistakes to avoid as we roll over into 2022.
As stated earlier, every single day counts for the national or county economy. However, there would be human-related events or acts of nature that would be quite disruptive to the economy. In my considered view, the following events of 2021 shaped the economy in the year, with some having potential to continue to do so into the medium and long term.
One, the vacation of tax-related Covid-19 stimulus economic packages in January 2021 was probably premature. The cloud of uncertainty due to the pandemic still hangs on us several months later. The net impact is that disposal household incomes have remained low, stifled consumption and business activities thereof. That may explain why a majority of respondents in an Infotrack survey published on December 23, 2021, did not have any plans for Christmas extravaganza. How this has impacted business and employment recovery may only be known in the medium term.
Two, the full resumption of learning across the country in January 2021 was significant in many ways to the economy. It not only re-started one of the worst hit sectors of the economy, but also restored the confidence that we could go back to our normal way of live, albeit with some restrictions. With a low number of vaccines available for the earlier part of the year, I imagine maybe this inadvertently helped accelerate some sort of herd immunity. But the health experts will explain to us the mystery behind Africa’s resilience against the virus some day.
Three, the BBI campaigns and related legislative drama in the county assemblies and Parliament. The net impact was to heighten political tensions, contravene health protocols and consequently prolong lockdowns. This did not only demonstrate how insensitive those entrusted to manage the economy are, but also led to loss of trust on the country's leadership. This would later manifest itself in the anti-vaccine drive that has persisted even when they are widely available now.
Four, while still related to three above, the High Court and Court of Appeal decisions on the BBI process will remain the most monumental economic moment many years into the future. Outside scuttling the political machinations for the transition, the judicial arm of government affirmed its authority as an impartial arbiter in cases of disputes. An assurance on the sanctity of the rule of law is a vital ingredient in the world of commerce. Beyond that, how these decisions will shape the political matrix in 2022 will influence the economic philosophy in the country not only for the coming decade, but for several generations into the future.
Five, the debt question and Kenyan petition to the International Monetary Fund (IMF). While in itself the initiative by ordinary citizens to the IMF may not have reversed their decision on debt commitments to the country, it signifies the growing awareness on public affairs among folks. It affirms the rights on public participation in decision-making and probably a warning to the political elites that things may not be business as usual come 2022.
Six was opening the lid on the private financial dealings of senior public officials. While it may sound like a distant memory now, the Pandora boxes may come in handy in the heat of the race to the next government. As the current crop of political leaders enjoy their final moments of glory, the next generation of leaders may be taking note of these things. Power and access to it is always a transient variable in economics. As new generations emerge to claim their place in the management of their countries, the old order may have to give way for a new order and shift economic power games.
Seven is the delayed release of the 2021 Economic Survey. For many people this may pass like another normal day in the slow wheel of government business, but for investments and businesses, right data and evidence is key. It is not a question of just releasing the stats per se but the confidence in the data itself. It has never been made clear why it was necessary to delay such critical data for several months. This may mean a cloud of doubt in the reliability of the data in business decision making.
Finally, it was the full opening of the economy on Mashujaa Day. I think this should have come much earlier, probably in May/ or June. The moment senior public officials and political leaders could not be accountable on the health protocols, it made no sense to expect ordinary folks to obey them. Nonetheless, it was a huge relief to millions of true hustlers that they could go on with their economic activities without police harassment. I'm sure the two months succeeding this re-opening of the economy is the reason many households can afford a smile over Christmas.
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