This archive report was first published on 5 May 2020.
On May 5, 2020, the World Bank released its Kenya Economic Update, which forecasted a 1.5% Gross Domestic Product (GDP) growth rate for Kenya in 2020.
According to the report, the low growth rate in the Kenyan economy is attributed to COVID-19-related supply side and demand side shocks affecting both the local economy and the global economy.
Prince Muraguri, a resident economist, analyzed the report's key highlights, which include:
- The services industry has slowed down significantly due to decreased interactions among economic agents, with most people staying at home.
- The manufacturing sector has slowed down to sub-50 levels, comparable to those experienced in 2017 after the election cycles, as indicated by the Stanbic Bank PMI Index.
Additionally, the report highlighted the following public finance trends:
- The fiscal deficit is expected to widen to 7.8% in FY19/20, from the pre-COVID target of 6.3%.
- The debt-to-GDP ratio has increased to 63.2% in FY19/20, from 62.1% in FY18/19.
Macroeconomic analysis revealed:
- Overall inflation has picked up but remains within target.
- With low inflation and a negative output gap, the Monetary Policy Committee (MPC) has lowered the Central Bank Rate (CBR) in its three consecutive meetings.
- Credit to the private sector is still weak but has started to pick up to 7.7% in February 2020.
External account trends include:
- The current account deficit is expected to narrow from 4.6% of GDP in 2019 to about 4.5% in 2020.
- External financing needs have increased, as access to global international markets is effectively shut while the crisis persists.
Given the uncertainty surrounding the COVID-19 pandemic, the figures provided in the report may change depending on how quickly the situation is brought under containment.
