Economic ghosts of 2023 and prospects of the new year

A sunrise in Nairobi. Will the economy turn around in 2024? [Iraki, Standard] More Kenyans are celebrating the end of 2023 than the beginning of 2024. They know enough of 2023 but little of 2024. It's like leaving a bad marriage and hoping the next one will be better. Let me start by awakening a few ghosts of 2023. One was the great deflation of political promises. For realists, that was expected. "Good politicians" tell voters what they want to hear and then deal with the consequences. We warned that "flip switch "economics do not exist like in politics. Through one day of voting, you can replace the entire political system. You can't do that with an economic system. Lots of voters hypnotised by political rhetoric believed in overnight economic transformation, more so with religious overtones. The second ghost was inflation driven by new taxes and levies. Add depreciation of the shilling. The salaries and wages have not gone up to compensate for the new taxes and levies. This is where hustlers beat us; they easily adjust their prices, and we can't easily adjust our salaries. Does this explain why every Kenyan has a side hustle to beat inflation and erosion of the purchasing power? In one research sample, I found 65 per cent of the employees have a side hustle. Three was the debt burden. It was Kenya Kwanza's poisoned chalice. By paying the part payment of the Eurobond, the government has inoculated Kenya against default and the unintended consequences. But the local debts should be addressed with the same seriousness and urgency. Do we factor in local debts owed to contractors and government suppliers in calculating the debt ceiling? Four is external ghosts. The war in Ukraine, Israel-Hamas and Houthi rebels disrupting the shipping lanes. These ghosts are felt at home through high fuel prices and subsequent inflation. Five is the return of the International Monetary Fund (IMF) and other Western lenders as the key players in the Kenyan economy. How often do you hear of China today? One of the unintended (I think it was intended) consequences of the 2022 polls was shifting Kenya into Western orbit just as the Great Airlift did 64 years ago. Paradoxically, Kenya Kwanza benchmarks with Kibakinomics which muted IMF. We can add a few other local ghosts like banditry, road accidents, corruption, learnt helplessness, tribalism, jealousy and class system. They too haunted us and are unlikely to be exorcised in the next year. What of economic prospects for 2024? Should we sing "The Storm is Over" by R Kelley? Read on. The gross domestic product (GDP) growth is projected at six per cent in 2024, says Africa Development Bank. Will it be equitable, will the rising tide raise all the boats? In 2024, inequality will not end. As is common in capitalist countries, innovations spawn new wealth. Without innovations like M-Pesa, wealth shifts around, without growing. It can be through tenders, outright corruption or inheritance. Despite all the hustlers' narratives do not expect a dramatic shift in wealth distribution in 2024. Two, will more jobs be created? If the "no visa" works and tourists flock into the country, expect more jobs. Let's also not discount the fact that high-end tourists could feel "the dilution" and keep off. More jobs could be created once we get used to high prices and taxes and adjust our consumption patterns. Three, inflation will slow, unless the Red Sea shipping disruption by Houthi rebels becomes widespread. The market seems to have "factored" in the Ukraine war. Good rains will reduce food inflation. Four, high interest rates will check inflation too despite slowing down credit growth and spawning interest in government paper (debt again). Five, most of the government revenues will continue going to servicing debt and recurrent expenditure, read salaries and wages. The development will be put on hold, more so when we don't want to fund it through debt. Will PPP start where debt stopped? Six, I expect renewed interest in debt after Eurobond is settled. Shall we become more confident to borrow offshore? Will Western debt replace Chinese debt? Seven, the national mood will affect economic growth prospects. Do the majority of the Kenyans believe the worst is over? If yes, will they direct pent-up anger into economic activities? Will the narrative that taxes stopped an economic meltdown sell? How do we reverse the perception that the government does not care? Eight, we shall not escape external events. Shall we define and pursue our strategic interests like other countries? Will Somalia and DRC joining the East African Community pay off? Will the arc of instability from DRC through Sudan, Ethiopia, and Yemen into Somalia stabilise with economic dividends thereof? Finally, the best achievement of 2024 could be forgetting the economic pains of 2024 or getting used to them. Let's make this year, prosperous in all frontiers with more money in our pockets and more thanksgiving in our hearts.

Economic ghosts of 2023 and prospects of the new year

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