List of Economic Recession Triggers in Kenya to Watch in 2020

Economic Recessions, or periods when employment, GDP growth, income, employment, and retail sales stutter, are part of the economic cycle, although they’re notoriously difficult to predict.

In Kenya, however, a recession in the economy is looming due to some deep-rooted issues within the country.

2020 is already proving to be hard to the common mwananchi and with the way things are going, it’s not going to get any easier. In fact, it will get harder and harder.

Here are some of the economic triggers to watch out for a recession in Kenya in 2020:

1.Locust Invasion

The locust invasion witnessed in the country in late 2019 and early 2020 could have a negative impact on agricultural output, leading to higher inflation that could slow down economic growth.

Agriculture is a key sector in Kenya, accounting for 26 percent of GDP in 2019. As the world’s largest exporter of black tea and the second-largest exporter of fruit and vegetables, Kenya, which is highly dependent on these exports, is also now facing the threat of a depreciation of the Kenyan shilling.

2. Consumer strength waning

High unemployment, declining wages, and difficulty in getting credit in Kenya have been some of the many reasons that consumers’ strength has been waning in recent months.

3. SMEs collapsing

Close to half a million small enterprises in Kenya die annually as the business environment in the country gets bumpy.

SMEs are a big contributor to the economy and with so many dying before even celebrating their first birthdays, the economy is bound to be affected in a negative way.

4. High Unemployment rate

The rate of unemployment in Kenya, especially among the youth is almost at crisis levels.

As unemployment rises, economic growth is affected and this can lead to a recession.

The unemployed will have less income to spend leading to lower consumer spending, lower Aggregate Demand and lower growth rates.

5. Unmet tax targets

The National Treasury records reveal that the Kenya Revenue Authority (KRA) missed half-year revenue targets by 88.3 billion shillings.

In the first six months of the 2019/2020 financial year, KRA netted Ksh857.8B with income tax recording the biggest miss of 25.9 billion shillings.

6. CoronaVirus scare

The coronavirus fears are already having effects on different parts of the world and Kenya has not been left behind.

Different sectors within the economy are bound to start feeling the heat, including the tourism and manufacturing sectors.

The Kenyan shilling has already caught the fever and has tumbled to trade at a three-month low of 102.9 against the dollar. This is after the Central Bank of Kenya (CBK) started buying dollars to increase its stockpile and boost its foreign currency war chest in preparation for the bad days ahead.

7. Correcting real estate prices

House prices in Nairobi’s high-end estates have continued to decline, indicating a market correction as the sector grapples with the oversupply of units and poor cash flow in the economy.

8. Toxic politics

Kenya suffers from the perennial misfortune of toxic politics, with weak systems that have failed to insulate the economy from the cycle of elections.

This has left the fragile tourism sector operating at the mercy of politicians, who unfortunately do not waste a minute to bring it down whenever an opportunity presents itself.

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