Kenya’s economy goes into recession due to Covid 19

Kenya slid into a recession for the first time in at least two decades in the third quarter of 2020 as measures introduced by the East African state to slow the spread of the Covid-19 pandemic continued to hurt output.
The contraction in growth was preceded by the first GDP contraction since September 2008 with GDP slumping by 5.5 per cent (revised from -5.7 per cent) between April and June.
Gross domestic product in East Africa’s biggest economy fell 1.1% compared with a year earlier, after shrinking a revised 5.5% in the second quarter, the Kenya National Bureau of Statistics said Thursday by email. The outcome matched median of three economists’ estimates in a Bloomberg survey.
Before the decline in the second quarter, the economy last contracted in the third quarter of 2008, when post-election violence led to a 1.6% drop in output, according to the statistics office. The agency only started publishing quarterly GDP data in 2000.
Kenya’s economy contracted for a second straight quarter
Kenya confirmed its first coronavirus infection in mid-March and later imposed a partial lockdown. Shutdowns in key markets such as the European Union and the U.K. as well as global travel restrictions hit the country’s main foreign-income earners, including tourism and exports of tea, flowers, fruit and vegetables.
While the government had moved to lessen restrictions on enterprise following the initial COVID-19, the retention of tough measures including a night time curfew alongside the closure of schools continues to inhibit economic activity.
The accommodations and restaurant sector for instance marked a 57.9 per cent contraction in growth following up a steeper 83.2 per cent decline in Q2 while the education sector shrunk by 41.9 per cent.
The hospitality and education sectors continued to bear the brunt of the pandemic as travel remained interrupted and school gates were shut.
The accommodations and restaurant sector for instance marked a 57.9 per cent contraction in growth following up a steeper 83.2 per cent decline in Q2 while the education sector shrunk by 41.9 per cent.
Other sectors to witness contraction in the period included manufacturing (-3.2%), wholesale & retail (-2.5%) and other services (-4.5%).
Moreover taxes on products declined by 4.2 per cent on the back of tax relief measures by government to cushion against the effects of the COVID-19 on the economy.
The economy however continued to find respite in the resilient agriculture sector which registered a higher 6.3 per cent growth from 5 per cent at the same time in 2019.
The standout performance was supported by increases in tea production, exports of fruit and sugar production according to the statistician’s office.
The solid growth in agriculture was supplemented by expansion in other sectors including construction (16.2%), ICT (7.3%), mining (18.2%), finance (5.3%) and real estate (5.3%).
According to the KNBS, Kenya’s last recession — defined loosely as two consecutive quarters of declining GDP growth — was registered between June and September 2002.
The recession definition however defers in various quarters with the US National Bureau of Economic Research (NBER) describing recession as a significant decline in economic activity spread across the economy and lasting more than a few months.
This effect is mirrored in real GDP growth, incomes, employment, industrial production and wholesale & retail sales.
The third quarter contraction however carried mixed signals with employment for instance rebounding with 1.8 million jobs created after 1.7 million job losses in the Q2.
The economy is however projected to have recovered in the fourth quarter to December anchoring better prospects for 2021 growth.
“Leading indicators for the Kenyan economy point to a recovery particularly in the fourth quarter of 2020, from the disruptions earlier in the year. This recovery is supported largely by strong performance in the agriculture and construction sectors, resilient exports, and continued recovery in manufacturing and services,” the Central Bank of Kenya (CBK) said in a statement on Wednesday.
“Against this performance and the favourable global outlook, the economy is expected to rebound strongly in 2021, supported by recovery in the services sectors particularly education, manufacturing, resilient agriculture and the ongoing policy support through the Government’s economic recovery plan.”