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Why Christmas fete is also an economic event

By XN Iraki | December 24th 2017 at 12:00:00 GMT +0300

Buffalos at Lake Nakuru National Park. Lots of Kenyans travel around this season. [XN Iraki, Standard]

Two elections in a year can strain any economy. Ours was no exception. Policy makers are scratching their heads on how to reverse the downturn.

They could borrow from US President Donald Trump and cut taxes. With more money in our hands, the demand will go up, creating more jobs and making the economy more vibrant.

While we could worry about the deficit, it is a fact that money is more efficiently utilised and allocated in private hands than in public hands.

The fall in revenue due to lower taxes is often offset by increased economic activities and expansion. Tax cut has another positive effect - it reduces tax evasion which could in the long run lead to higher revenues.

The tax cut might need an act of Parliament but marshaling enough votes after the just concluded polls is hard. It could have worked just before the polls to sway voters. With a budget deficit, a tax cut is unlikely but can be tried.

What of interest cap which was supposed to lead to more borrowing to invest or consume but paradoxically had the opposite effect?

There is another alternative to tax cut - Christmas. The festive season is a great economic stimulus after elections and petitions. It has kept everything in abeyance.

Stimulates the economy

The traffic is heavy and parking lots full as Kenyans prepare for the festive season. The preparations seem unusual this year. Could the pent up energy due to electioneering period be driving the festive season? What of the money that was never spent as we “waited”?

Traditionally, Christmas is a season of great consumption - some firms make half of their profits around this season. That stimulates the economy, creating jobs.

The feel good effect that the tumultuous year is over opens our pockets. Christmas acts like a tax cut, we feel we have more money in the pocket and consume it. The whole economy feels it. There is, however, a new brake on the economic stimulation of the Christmas, the early release of KCPE and KCSE. Parents know they have to take kids to secondary school next year.

This may mute consumption unless the promise of free education is actualised. It is classic trade-off. Should we consume now or invest in the future of our children?

Keen observers will note that Kenyans nowadays forget events and move on fast, a characteristic of developed countries. Note how news ages fast and gets forgotten?

How specifically will Christmas stimulate the economy? Which sectors will matter most? Economic growth comes from either investment or consumption. In December, there will be little investment. Most of the growth will be from consumption.

Any sector that is construed to make us merry will benefit. That includes travelling. We like proving that we are on holiday by leaving our familiar territory and travelling.

The affluent travel abroad, preferring exotic islands. Hustlers like me and you prefer pilgrimages to where we were born, to cut costs and make peace with our people. SGR is fully booked. Tourism is booming.

Lots of Kenyans abroad come home and can be recognised by their unusual behaviour such as ganging up in hotels, restaurants and golf courses. They stimulate the economy with their dollars.

Restaurants do well too as companies hold end of the year’s parties or friends meet to review the year and celebrate the triumphs and failures.

Most of these premises hike prices around this festive to cope with demand. We are spending more time queuing to pay in supermarkets than in shopping and vouchers are running out.

What of attire and luxury item dealers? We love buying something for Christmas - from cars to clothes and food. Add the gifts and economic effect of Christmas is quite evident.

In homes and work places, gifts are exchanged and they are not free, they cost money. Some sectors such as finance benefit too, don’t we keep our ATMs and M-Pesa busy? Money changes hands faster and that stimulates the economy.

The interdependence of the Kenya’s economic sectors means that the few sectors that do well around this festive season pull the others along.

More consumption

Truth be told, Christmas is not just a celebration of Jesus Christ’s birthday, it is an economic event. The stimulus of this Christmas is much welcome, a bulwark against prolonged economic contraction.

This year the “feel good” effect after the petitions were determined and the country never exploded could be translated into more consumption.

—The writer teaches at the University of Nairobi.

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