The good, bad and ugly of a pandemic year
By Dominic Omondi
| September 10th 2021
The size of Kenya’s economy contracted for the first time in two decades in 2020 following a tumultuous period in which the Covid-19 pandemic killed businesses and rendered thousands jobless.
The latest Economic Survey 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 Economic Survey 2021 also showed that the number of 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, including jua kali artisans and mama mboga.
Those with permanent jobs reduced by a tenth, 187,300, to 2,741,100 as a lot of companies offloaded employees to stay afloat.
Released five months late, the Economic Survey 2021, paints a picture of a battered economy saved by the swathes of farms around the country even as factories grew silent and hotels shut down.
Treasury Cabinet Secretary Ukur Yatani while confident that the economy would pick up this, said its performance last year was adversely affected by the Covid-19 pandemic which resulted in significant slowed-down economic activities.
“During the review period, the government's priority was to safeguard citizens' lives while at the same time cushioning the economy from the effects of Covid-19.
The restriction in movements and social distancing led to disruption in labour supply, leading to reduced demand for goods and services,” said Yatani when launching the survey yesterday.
Accordingly, many businesses, especially service industries like tourism, significantly slowed down during the second quarter of 2020.”
In a year when travel within and outside of the country was largely curtailed as governments sought to stop Covid-19 in its tracks, the country’s tourism sector was brutally hit. The sector contracted by 47.7 per cent as foreign visitors kept off the Kenyan shores, with a lot of major hotels shutting down.
For every five people employed in accommodation and food services two lost their jobs after the government implemented stringent measures including dawn-to-dusk curfews and in some cases prohibited any kind of social gathering.
Transport and storage was also affected by the restriction in movement declining by 7.8 per cent in a year when the country imposed partial lockdowns in some of the counties.
Manufacturing, the second largest employer, also posted a negative growth last year owing to a disruption in global supply chains and stringent containment measures.
The nine-month closure of schools negatively impacted the education sector which contracted by 10.8 per cent during this period under review. Schools have since been re-opened.
The release of the survey also came at a time when the Kenya National Bureau of Statistics (KNBS) reviewed the structure of the economy to reflect the prevailing circumstances.
As a result, agriculture which contributed more than a third to the country’s GDP in 2019, was revised downwards to 21.2 per cent in that year and 23 per cent last year.
However, sectors such as Information Communication and Technology (ICT) and real estate took a dominant space in the structure of the economy after it was rebased with the national statistician using 2016 as the base year for calculating the real GDP.
The survey came after a prolonged period of delay that saw its Director-General Macdonald Obudho appear before a National Assembly Committee.
Saitoti Torome, the Principal Secretary for Planning, said that, besides rebasing and revision, the other factor that contributed to the delay in release of the data was due to challenges by some suppliers to respond.
Yatani explained there were problems getting feedbacks during the pandemic period.
“We didn’t want to present data that people were going to cast doubt on…Now it is foolproof,” said Yatani.
Despite the contribution of agriculture to GDP reducing after the revision, it raised a bulwark that prevented what would otherwise have been an annihilation with a lot of Kenyans hitherto employed in hotels and factories in cities rushing to their farms to keep up with the cost of living.
For long known as the backbone of Kenya’s economy and the biggest employer, farming lived up to its billing to grow at a faster rate of 4.8 per cent compared to 2.6 per cent in 2019.
Increased crop production including tea and food crops such as beans, rice, sorghum and millet.
Another sector that did much of the weight-lifting was building and construction was increased at a blistering rate of 11.8 per cent, one of the fastest growth in recent times.
The government, which took a lot of loans during the pandemic year, was the biggest investor in this sector kick-starting a lot of infrastructural projects including the Nairobi Expressway and Likoni Bridge in Mombasa.
The ICT sector also grew by 4.8 per cent, a slower rate compared to a revised growth of 7.5 per cent in the previous year.
Given that there was a lot of restriction in physical meetings last year, ICT was expected to play a significant role with a lot of people holding meetings online or just working from home. This saw an increase in the number of Kenyans with internet connections and mobile money transactions.
Financial and insurance sector posted a growth 5.6 per cent compared to 6.9 per cent, helped mostly by Government borrowing.
Retail and trade was affected by the restriction in movement, especially the dusk-to-dawn curfew, contracting by 0.4 per cent.
Electricity and water supply posted a slower growth 0.1 per cent compared to 1.7 per cent on account of a reduction in the number of businesses that consumed power during this period.
Mining and quarrying grew by a faster rate of 6.7 per cent compared to 4.3 per cent.
The government is however optimistic that the economy will rebound this year to grow at more than six percentage points.
“Last year, around this time, you would think that this is a deserted city,” said Yatani.
However, the government has indicated that failure to vaccinate a lot of people could thwart the country recovery prospects.
Moreover, the National Treasury, although it has estimated a huge pickup in economic activities this year, expects the growth to decelerate next year due to intensified political activities which tend to discourage private investment.
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