By Victor Amadala, NAIROBI Kenya
Kenya’s
economy has been hit hard by Covid-19, severely affecting incomes and jobs
since April, according to a World Bank report
It indicates that the pandemic increased poverty by four per cent (or an additional two million poor) through serious impacts on livelihoods, by sharp decreases in incomes and employment.
The unemployment rate increased
sharply, doubling to 10.4 per cent during the period under review as
measured by the KNBS Quarterly Labor Force Survey.
Many wage workers who are still
employed face reduced working hours, with average hours decreasing from 50 to
38 hours per week.
Almost one in three household-run
businesses are not currently operating, and between February and June, average
revenue from household-run businesses decreased by almost 50 per cent.
''This has exacerbated food insecurity, and
elevated pain and human suffering,'' the lender says in the report.
The Kenya Economic Update
covering April to October shows the country's economic growth shrunk to
negative 0.4 per cent compared to a growth of 5.4 per cent a similar
period last year.
"The economy was exposed
through the dampening effects on the domestic activity of the containment
measures and behavioural responses, and through trade and travel disruption
(affecting key foreign currency earners such as tourism and cut flowers),'' the
latest report by the lender reads.
According to the bank, the drop
reflects a worse-than-anticipated Q2 GDP outturn, mainly due to a sharp
reduction of services sector output, especially education.
As a result, the economy is
projected to contract by one per cent in 2020 in the baseline scenario, and by
1.5 per cent in a more adverse scenario.
"This revision essentially
adopts the adverse scenario outlined in the April 2020 update, reflecting the
more severe impact of the pandemic to date than had been initially anticipated,
including on the measured output of the education sector following the closure
of institutions in March,'' World Bank says.
The services sector contracted by
3.2 per cent year-on-year during the six months, as a moderation in the first
three months of the year was followed by a sharp outright contraction in the
following quarter.
Accommodation and restaurants
(tourism) contracted by 83.3 per cent , subtracting 0.9 percentage points from
overall GDP growth.
Transport and storage services
contracted by 11.6 per cent, and wholesale and retail trade activity by 6.9 per
cent over the same horizon, also contributing to the services sector
contraction.
The impact on education was
particularly large and was the main driver of the contraction of overall output
during the period.
''With schools and other
institutions shut down, education sector output is estimated to have contracted
by 56.2 per cent, exerting a drag of 3.8 percentage points on year-on-year GDP
growth during the quarter,'' World Bank says.
Wholesale and retail trade’s
contribution to growth declined to nil, while the contribution from transport
and accommodation contracted severely
This reflects the closure of
national borders, suspension of international flights, and limited mobility.
As a result, accommodation and
food services’ contribution to GDP shrunk to negative 0.5 percentage points.
The cumulative contribution (for the three key sub-sectors) declined to -0.7
percentage points from about one percentage point (or approximately 0.3
percentage points of lost output).
In response to the crisis, the
government has deployed both fiscal and monetary policies to support the
healthcare system, protect the most vulnerable households, and support firms to
help preserve jobs, incomes and the economy’s productive potential.
Tax revenue dropped below target,
due to the marked slowdown in economic activity, as well as tax relief as part
of the government’s fiscal response package.
At the same time, expenditures were
raised to strengthen the capacity of the healthcare system to manage
infections, protect the most vulnerable households, and support businesses.
Even so, moving into the second
half of the year, high-frequency data point to a recovery in economic activity,
but output remains well below levels experienced before the shock generated by
the pandemic.
''Micro-level data show that
hardships and socio-economic challenges (lost incomes and unemployment) remain
elevated,'' the report says.
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