While the economic forecast is looking gloomy for the entire world right now, there is still actually room for optimism here in Kenya when it comes to our long term financial goals. A recent report by the IMF (International Monetary Fund) shows that while the economic projections for 2020 look dire, this is not necessarily the case for our country beyond that.
This year, the Kenyan economy is predicted to grow by only one per cent. Normal economic growth in a developing country is typically in the range of 5-6 per cent, while high income countries tend to grow by about 3% annually. But Kenya is certainly not in a worse state than other countries globally.
China has entered a recession (generally defined as two successive quarters of negative growth) for the first time since the Cultural Revolution, while the rest of the globe is suffering a recession that can only compare to that of the 1930s.
According to the Central Bank of Kenya, the post-election violence of 2008 slowed Kenya’s economic growth down to 1.5 per cent. While this year’s growth is a far cry from the original IMF prediction at the beginning of the year – before the pandemic – of about six per cent, we will be able to bounce back eventually. It will just be slower than previously expected, and we must be patient.
The good news is that the IMF’s report predicts that Kenya’s economic growth will improve by 6.1 per cent next year. This rebound is based on a number of factors, in particular the development programmes guided by the Uhuru administration. Healthcare, pro-entrepreneurship and SME-policies, and overall peace and stability are some of the main contributing factors.
We have already experienced how coronavirus is changing many aspects of our lives, at least for the foreseeable future. We need to brace for change, together. But it is also important that we maintain the peace and remain hopeful.
The IMF projection for growth next year is subject to change based on the possible volatility that might be caused by 2022 campaigns. The report said that “economic forecasts at this juncture are subject to higher-than-usual degrees of uncertainty”.
This uncertainty has also been contributed to international factors beyond our control. The tourism and agriculture sectors took the hardest hits after the PEV, and it is possible that these two things will also be disproportionately affected by the coronavirus outbreak. However, the IMF predicts that Kenya’s tourism sector will not take as hard a hit as many other African countries.
Kenya’s economic growth is in better shape than most sub-Saharan African countries that lack diversified economies and rely on oil and mineral exports for growth. Financial diversification for a country’s economy is based on many of the same principles of diversification of an investment portfolio. If one segment of it is suffering, the whole portfolio will not come crashing down.
This is testament to Uhuru’s efforts to shape a diverse Kenyan economy, which ultimately will be able to withstand the test of time. The past few years have seen not only a boom in the tourism and agro sectors, but also in high tech, science, research and innovation, and manufacturing.
Kenya also received a positive health care ranking in the IMF report relative to our neighbours in the region. At this juncture, I am extremely grateful that months of Universal Health Care was already implemented in four counties, and the government is working towards rolling it out in more counties.
Quality, accessible healthcare for all is important at all times, but especially during the throes of a global pandemic. It could be one of the things that makes or breaks our growth when the pandemic begins to recede globally. While the economic forecast is still shrouded in uncertainty, Uhuru’s swift and clear containment issues at least give us the comfort that our government is doing all that is possible to protect us.
Progress in finding vaccines and treatments might be slow, and other countries with whom we have a lot of economic interaction may not be able to get back to business as quickly as we can. The global financial market predictions depend on many factors and the prices of commodities are subject to extreme volatility in the coming months.
But Kenya is in a better position than many others. The months ahead will be difficult, but our future remains bright.
