Kenya’s 2021 Economic Prospects Hopeful as Vaccines Ease COVID-19
KEY POINTS
CBK sponsored surveys have revealed that the general optimism is attributed to the continuing vaccinations and easing of COVID-19 containment measures.
Reports from surveys conducted by the Monetary Policy Committee on various sectors including Market Perceptions, CEOs, and Hotels, have shown general optimism about Kenya’s prospects for economic growth in 2021.
The CBK sponsored surveys revealed that the general optimism is attributed to the continuing vaccinations and easing of COVID-19 containment measures.
Respondents also held good hopes for the expected implementation of measures in the FY2021/22 Budget, including the economic stimulus program and the continued investment in infrastructure.
Respondents, nonetheless, were concerned about continued uncertainties over the pandemic, increased taxes, and heightened political activity.
Meanwhile, hotels indicated a consistent recovery from the decline witnessed in April, particularly regarding forward bookings.
The finding comes even as a new study by Deloitte that has projected Kenya’s GDP to recover from a meager growth in 2020 to post a 6.3 percent growth in 2021 on the back of strong agricultural sector growth and a revamped manufacturing sector.
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According to Deloitte, the agricultural sector painted a grim outlook early last year, due to the locust swarm infestation affecting domestic agricultural production.
As of Q4 2020, the sector reflected a revamped outlook owing to favorable rains and success in beating back the second wave of desert locusts.
As such, the sector is estimated to have posted a 5.1 percent growth in 2020, emerging as the silver lining sector.
CBK’s survey also shows that the manufacturing sector has seen an improvement in recovery from the effects of the pandemic.
In May 2020, the Kenya Association of Manufacturers (KAM) conducted a study that showed that 91 percent of non-essential goods manufacturers saw a significant fall in demand compared to 74 percent of essential goods manufacturers who had benefited from increased sales.
This led more than 40 percent of manufacturers to reduce their casual workforce and 27 percent of the manufacturers to reduce their permanent workforce.
However, as at the third and fourth quarter of 2020, business sentiment in the manufacturing sector had largely improved due to the ease of social distancing measures, resumption of global aviation, and opening up of country borders for external trade.
“The sector is estimated to have contracted by 2.5 percent in 2020 largely due to the vagaries experienced in Q1 and Q2 2020,” the study concludes.
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