Kenya's economy will grow by a paltry 0.6 per cent, National Treasury CS Ukur Yatani has said, revising his previous projection of 2.5 per cent.
The CS on Wednesday cited continued effects of Covid-19 on the domestic and global economy.
“It is important for us to underscore that what happens in the global arena has major implications in the performance of our economy,”Yatani said when he launched the public sector hearings on the budget proposals for the financial year 2021/22 and the Medium-Term.
In April, the CS had projected a growth of 2.5 per cent and in the worst-case scenario, it would fall to 1.8 per cent.
In July, the CS expressed confidence that growth would not fall bellow 2.5 per cent.
“We are firmly at 2.5 per cent. This could be the lowest that we can go,” Yatani said at his Treasury Building office, when he launched the second voluntary national review on the implementation of the sustainable development goals, report.
“With the re-opening of the economy, we are optimistic we could realise slightly better outcome,” he had noted.
Initial forecast, pre Covid-19 was placed at between 6.2 and 7.0 percent.
“The growth outlook for 2020 has been revised downwards following receipt of more recent indicators, the contraction of economy recorded for the second quarter of 2020 and the global projections released in October 2020,” Yatani said on Wednesday.
The Kenya Economic Update covering April to October shows the country’s economic growth shrunk to negative 0.4 per cent compared to a growth of 5.4 per cent a similar period last year.
“In this respect, economic growth for 2020 is projected at 0.6 per cent in 2020 and 6.4 per cent in 2021. Over the medium-term growth will be above 6.0 per cent,” said Yatani.
The growth, albeit slow, will be supported by stable macroeconomic environment, ongoing investments in strategic priorities of the government under the Big Four Agenda, turn around in trade as economies recover from Covid-19 Pandemic and expected favorable weather that will support agricultural output, Yatani notes.
“It is worth noting that in spite of the Covid-19, we have continued to maintain macro-economic stability as measured by the existing low and stable inflation and interest rates and a competitive exchange rate,” he said.
He notes economic activities have started showing signs of recovery albeit with weaknesses in the tourism and education sectors.
Agriculture continues to remain strong thanks to above-average rainfall whereas activities in services sector have started to pick up supported by the easing of restrictions.
Growth in the East African Community region is estimated to slow down to about 1.0 per cent in 2020 compared to a growth of 6.2 per cent in 2019.
The World Bank has projected Kenya's economy will contract by one per cent in 2020 in the baseline scenario, and by 1.5 per cent in a more adverse scenario.
“The economy was exposed through the dampening effects on the domestic activity of the containment measures and behavioural responses, and through trade and travel disruption, affecting key foreign currency earners such as tourism and cut flowers),” the global lender says in its latest Economic Update.