This archive report was first published on 6 May 2020.
As of May 5th, 2020, Kenya had recorded 535 confirmed COVID-19 cases, and the number of daily new cases was expected to flatten out to ease the short-term macroeconomic impact.
Agusto & Company Limited, a leading credit rating agency, has forecasted that Kenya's Gross Domestic Product (GDP) growth is expected to fall below 2 percent should the COVID-19 pandemic and attendant lockdown be sustained beyond the second quarter.
The agency also noted that Kenya's Big 4 Agenda will be sacrificed as more resources are channeled towards curtailing the spread of the coronavirus.
According to the agency, agriculture, manufacturing, tourism, and financial services will experience high levels of disruption, with ICT experiencing the least.
The Kenyan Shilling is also expected to depreciate by around a 10% range to the dollar and hover between Kshs 103 to Kshs 109 for the rest of 2020.
“We hope that the number of daily new cases flattens out to ease the short-term macroeconomic impact. The Kenyan economy is in dire need of stimulus packages (domestic and international), to cushion the adverse impact of the slow growth on businesses,” said Ikechukwu Iheagwam, Country Manager, Agusto & Company Limited.
The agency also anticipates disruption in various sectors, including agriculture, manufacturing, and banking.
In agriculture, the horticulture and floriculture exports will be disrupted, with limited international and regional flights and weak demand in major markets in Europe and Asia.
“Farms may also struggle to service their loans with most farms currently running at capacity of less than 50%. Nonetheless, disrupted local harvests in major European, Middle Eastern, and Asian markets is bound to drive up demand for fruit and vegetables,” added the agency.
In manufacturing, the demand for essential and pharmaceutical goods surged in March and April 2020, but the real impact of COVID-19 on manufacturers of essential and pharmaceutical goods is expected to be felt from the second half of the year.
The banking and financial services sector is also expected to witness a tepid performance in 2020, with projected falls in earnings, especially among vulnerable SMEs.
“Hence, we project an increase in banks’ non-performing loans though moderated by expected loan restructurings (or outright interest waivers) including the moratoria being advocated by the Government,” they added.
Despite the challenges, the agency believes that Kenya's resilient macroeconomic fundamentals, well-diversified economy, relatively stable local currency, and comfortable foreign exchange reserve buffer against short-term external shocks provide comfort that Kenya's economy will navigate through this unprecedented time as long as the approved economic palliatives are implemented without bureaucratic delays.
