By NJIRAINI MUCHIRA

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The coronavirus pandemic has devastated Kenya’s key sectors of agriculture and tourism, and the country is set to witness the worst economic growth in over a decade.

However, an immediate rebound is expected in 2021 if countries around the world contain the pandemic and the weather remains favourable for increased agricultural output.

The World Bank, in its 21st edition of the Kenya Economic Update report, said in the best case scenario, Kenya’s GDP will nosedive to 1.5 per cent this year from 5.4 per cent recorded in 2019.

With economic activity heavily weighed down by a combination of supply and demand shocks from both the external and domestic fronts because of the pandemic, the worst case scenario could see growth shrink to one per cent. Concerns are also high that the pandemic could push the country into a recession. The government has forecast a 2.5 per cent GDP baseline with a potential contraction to 1.8 per cent.

“It is expected that the shock will reduce growth below that of 2008 when the country’s economy grew by 0.2 per cent from 6.9 per cent in 2007 as a result of the post-election violence, drought and the global financial crisis,” said the report titled Turbulent Times for Growth in Kenya. The report adds that Kenya’s economic outcome this year hinges on how the pandemic plays out both internationally and in the country, along with policy actions and the responses of households and companies.

Although the report paints a bleak year, an immediate bounce back is projected next year with growth estimated to pick up sharply to 5.2 per cent in 2021 and 5.7 per cent in 2022 before reaching the growth potential of six per cent in 2023. According to the World Bank report, Covid-19 has affected all sectors of the economy from disrupting imports of intermediate and capital goods, exerting pressure on agricultural exports, drastically reducing tourism earnings and remittances. The pandemic has also adversely impacted transport, retail trade, manufacturing and construction.

In manufacturing, for instance, the Purchasing Manager’s Index (PMI) has fallen below the 50-points mark indicating declining orders and growing negative business sentiment. The index has reduced from about 53.3 points in December 2019 to 37.5 points in March.

The government’s plans for fiscal consolidation have also been pushed off track because of the negative effects on revenue collection and increased expenditure pressures.

Before the outbreak, Kenya’s fiscal deficit had expanded to 7.7 per cent of GDP in the 2018/2019 financial year from 7.4 per cent in 2017/2018 while public debt had increased to 62.4 per cent in December 2019. In the current financial year, the government’s target was to reduce the deficit by 1.4 percentage points to 6.3 per cent of GDP and contain debt.

The World Bank now expects the deficit to rise to eight per cent of GDP in 2020.