According to the Kenya Economic Update (KEU), the country’s economy is expected to sustain recovery and gradually return to growth of over 5 percent on average in 2022-23.
The report says growth outlook is predicated on an upturn in the industry supported by reopening of the economy and strong capital spending, a moderate recovery in services as vaccination rollout steadily progresses, and adequate agricultural harvests and sales, helped by rising external demand from the recovering global economy.
The Kenya Economic Update (KEU), is a World Bank report series produced twice a year that assesses recent economic and social developments and prospects in the East African nation, and places these in a longer-term and global context.
On the demand side, the private consumption is expected to recover, supported by a pickup in wages and household incomes, and resilient remittances, it said.
“Consumer confidence and business activity should be supported by ongoing vaccination efforts and the return of mobility to pre-pandemic levels,” says the report.
The report notes the fiscal deficit is projected to decline from 8.7 percent of the GDP in the financial year 2020/21 to 4.2 percent in the financial year 2023/24 due to fiscal consolidation effort.
According to the World Bank, COVID-19 pandemic triggered stringent containment measures that were necessary to minimize the loss of life and lay the foundation for eventual recovery, resulted in widespread economic disruption, and losses in earnings and employment.
The report says the pandemic led to Kenya’s worst economic growth performance since 1992.
It says the country’s real GDP was growing at an annual pace of above five percent prior to the pandemic but last year it delivered a triple shock to the economy embodying the health and economic impact of the containment measures and behaviour changes, and reverberations from a synchronized global recession.
“As a result, in 2020 the economy suffered its first recession in nearly two decades and is estimated to have contracted by 0.3 percent,” says the World Bank.
It says the pandemic dampened most drivers of demand with private consumption which is the usual driver of domestic demand in Kenya having accounted for roughly three-fourths of output growth in 2019, and is estimated to have slowed markedly in 2020 as households reduced spending amid job and income losses.