Economy forecast to expand at slowest pace in decades

Kenya’s economy will likely grow at slowest pace in nearly two decades in 2020 on the back of Covid-19 shocks, a consensus outlook from 16 global banks, consultancies and think-tanks suggests.

Global economists see economic activity expanding 1.1 per cent this year, the slowest growth since 2002 (0.5 per cent growth) when the country was heading to presidential polls that ended the 24-year rule of President Daniel Moi.

This suggests that the global coronavirus pandemic shocks will hammer the economy harder than the twin shocks of deadly post-election skirmishes and global financial crisis which cut Kenya’s growth to 1.5 per cent in 2008 from 6.9 per cent the previous year.

The latest growth outlook, based on data compiled between July 14 and 19 by Barcelona-based FocusEconomics, is nonetheless a 10 basis-point upgrade from previous projection.

The upward revision is largely because of relaxation of curfew hours, removal of cessation of movement in two key cities and easing of lockdowns in Europe.

“Looking ahead, the Covid-19 shock is set to dent growth significantly this year as containment measures hamper domestic activity, while travel restrictions and feeble global demand cripple the external sector,” analysts at FocusEconomics wrote in the outlook report on Kenya.

“While fiscal stimulus should cushion the blow, risks are tilted to the downside, with the threat of a second locust invasion further clouding the outlook.”

President Uhuru Kenyatta on July 6 allowed free movement into and out of Nairobi and Mombasa for the first time in three months subject to compliance coronavirus containment measures, a month after he shortened the curfew hours to 9pm-4am from previous 7pm-5am.

Gradual easing of lockdowns in Europe, Kenya’s largest export market for farm produce, led to a growth in demand for exports in June for the first time since February, according to composite Stanbic Bank Kenya’s Purchasing Managers Index (PMI).

US largest lender, JPMorgan, is the most optimistic on Kenya’s growth outlook with a forecast of 3.2 per cent, followed by economists at Paris-headquartered BNP Paribas and South Africa’s Standard Bank who both project 3.0 per cent growth each.