As it emerges from a projected decline in output this year caused by the coronavirus crisis, Kenya’s economic growth is expected to bounce back next year, says the World Bank in its latest economic analysis.
According to the report, East Africa’s biggest economy is expected to contract by 1.0-1.5 per cent as the COVID-19 pandemic pushes two million people into poverty and takes a toll on the government’s finances.
“The economy is projected to rebound relatively quickly in 2021, lifting real Gross Domestic Product by 6.9 per cent year-on-year,” the bank stated.
“As the COVID-19 pandemic continues to threaten both the lives and livelihoods of Kenyans, we remain committed to supporting the government to allocate sufficient resources to the health sector to combat the pandemic, continue with mass testing, support self-quarantine, social distancing, and protect the most vulnerable groups,” said World Bank Country Director for Kenya, Keith Hansen.
“It is equally critical to provide well-targeted support to the most vulnerable affected households,” Hansen added.
Although the government forecast 6.4 per cent growth next year, the World Bank feared its forecast for growth in 2021 still faced significant risks.
This includes the uncertainty around the length and severity of the pandemic, unpredictable weather conditions and the pace of the global economic recovery.
Kenya’s economy had contracted by 0.4 per cent in the first half of the year, compared with an expansion of 5.4 per cent a year earlier.
According to the bank, the pandemic increased poverty by four percentage points as incomes dropped and people were laid off from work.
“The unemployment rate increased sharply, approximately doubling to 10.4 per cent in the second quarter,” it said, citing official data.
Kenya’s total debt jumped to 65.6 per cent of gross domestic product in June this year from 62.4 per cent a year earlier, the World Bank noted.
However, the bank urged the government to take advantage of debt service relief offered by richer nations, to free up liquidity that would have gone into repayments.
Kenya’s Finance Minister, Ukur Yatani, had reportedly said last week that the government planned to make a final decision soon on joining the G20’s Debt Service Suspension Initiative aimed at helping poor countries weather the pandemic.
“As economic conditions allow, policy should progressively prioritise returning to a medium-term fiscal consolidation path,” the World Bank added.
