The Effects Of Covid-19 To Kenya’s Economy

The Covid-19 pandemic is still sweeping across the world. With the new strain already reported in the United Kingdom, South Africa, and France, the world still has a long way to go before getting off the hook of this roaring pandemic.

In Kenya, the second wave of Covid-19 has already kicked off. Although the country has been experiencing lower infection rates as compared to the year 2020, the threat to livelihoods is still high. Given that schools have officially resumed, the chances of cases rising have increased.

The year 2020 goes down in the annals of history as the year that changed the world in almost every level by hitting it with a pandemic. A Covid-19 pandemic is an event in history that no one ever anticipated. Many people all over the world ended up reacting towards the pandemic.

In Kenya, the economy was hard hit by the pandemic. Almost every sector came to a standstill as the government and other stakeholders struggled to find out the best way to tackle the pandemic. The economy was almost collapsing as businesses struggled to remain afloat and as stringent measures from the government weighed heavily on them.

According to stats compiled by Cytonn Investments, during the first half of the year the economy contracted by 0.4% due to the 5.7 percent contraction in Q2’2020 down from a growth of 5.3 percent recorded in a similar period in 2019.

The contraction was largely driven by the 83.3 percent decline in the accommodation and food sector following the closure of most facilities and also the reduction in tourist arrivals into the country. Some of the other sectors like agriculture helped cushion the economy from further decline.  This is the first contraction since the third quarter of 2001 when the country recorded a 2.5percent contraction.

Job losses

The pandemic led to massive job losses among Kenyans. Companies that were struggling to remain afloat opted to fire their employees to sustain the business. Stats from the Kenya National Bureau of Statistics indicated that at least 2,000,000 Kenyans lost their jobs as a result of Covid-19.

At the same time, the World Bank estimated that at least 1.8 million Kenyans were pushed into extreme poverty as a result of Covid-19. The majority of Kenyans who were pushed into extreme poverty were from the informal sectors in major towns in Kenya.

Collapse of businesses

Many businesses shut down as a result of Covid-19. There is no exact record of how many businesses have shut down so far. Before the advent of Covid-19, stats showed that at least 450,000 SMEs were shutting down annually, 30,000 monthly, and at least 1,000 daily.

The introduction of the dusk to dawn curfew hit hard on such businesses as bars and clubs, leading to many of them shutting down. The hotel industry was among the worst hit. So many hotels shut down with some choosing to vacate the Kenyan market.