World Bank projects Kenya’s economy will rebound in 2021, growing by about 5.2%
Elvis Onchwari  |  Apr 29, 2020
       

The World Bank today released the Kenya Economic Update, April 2020. The report titled “Turbulent Times for Growth in Kenya” projects Kenya's economic growth for 2020 to come in at a baseline of 1.5% before strongly rebounding to 5.2% in 2021, on assumption that investor confidence will be restored soon after the COVID-19 pandemic is contained.

“The greatest uncertainty to this outlook, however, is the extent of the impact of COVID-19 global pandemic on Kenya.


Unanticipated large-scale community transmission of COVID-19 could disrupt domestic economic activity more severely and reduce growth below the baseline. Residual risks include the potential for drought and a second-round of locust invasion in mid-2020, which could reduce agricultural output and hurt rural incomes” stated the World Bank in a news briefing sent to newsrooms.

Due to the uncertainties in projecting Economic Growth the World Bank has 2 plausible scenarios

  1. In the first scenario, economic activity is assumed to be severely disrupted for two months, followed by a relatively rapid normalization. Severe disruption to economic activity is considered to have begun in mid-March, affecting the last two weeks of the first quarter, and is assumed to extend for the first six weeks of the second quarter (i.e. through mid-May). Under this scenario, growth is projected at 1.5%
  2. In the second scenario, economic activity is assumed to be severely disrupted for a longer, 3-month period. In this case, the period of major disruption extends from mid-March through mid-June, resulting in larger estimated reductions in value-added across affected sectors in the current (second) quarter. Under this scenario, growth is projected at -1.0%

 

The multilateral lender based its projections on the expected rise in private sector investment and improved credit access post-COVID-19. Favorable weather conditions are also expected to boost agricultural performance, improving food securing in the country and increasing exports hence strengthening household incomes, the institution said.

“We expect a strong pickup in 2021 of about 5.2 percent and here the main assumption is that investor confidence will be restored soon enough after containment of COVID-19,” World Bank’s senior economist Peter Chacha said.

He added that a quick recovery will be dependent on the measures and policies the government adopts to contain the pandemic. The COVID-19 global pandemic containment measures adopted so far, have had an enfeebling impact on the Kenyan economy with the aftershocks expected to reduce economic growth this year.

The measures adopted, including the dusk-to-dawn curfew, travel restrictions, closure of entertainment spots among others are expected to affect both production and consumption across the economy. A huge impact has already been reported in service sectors such as transport, retail trade, tourism, events, and leisure as well as the manufacturing and construction industries

According to the World Bank, well-targeted policies in response to COVID-19 may help reduce the falling demand and massive layoffs being experienced in various sectors and promote the economy’s resilience. Ensuring that vulnerable households have cash-on-hand, workers continue to receive salaries and ensuring that firms have enough cash flow (to pay workers and suppliers) and avoid bankruptcies, as well as supporting the financial system to avoid a credit crunch, are all equally important.

READ ALSO: ‘The Impact of Coronavirus on the Kenyan Economy’

 


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