Kenya Economic Update, November 2020 : Navigating the Pandemic
Kenya’s economy has been hit hard by COVID-19, severely affecting incomes and jobs. The economy has been exposed through the dampening effects on domestic activity of the containment measures and behavioral responses, and through trade and travel d...
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| Format: | Report |
| Language: | English |
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World Bank, Nairobi
2020
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| Online Access: | http://documents.worldbank.org/curated/en/957121606226133134/Kenya-Economic-Update-Navigating-the-Pandemic http://hdl.handle.net/10986/34819 |
| Summary: | Kenya’s economy has been hit hard by
COVID-19, severely affecting incomes and jobs. The economy
has been exposed through the dampening effects on domestic
activity of the containment measures and behavioral
responses, and through trade and travel disruption
(affecting key foreign currency earners such as tourism and
cut flowers). Real Gross Domestic Product (GDP) contracted
by 0.4 percent in H1 2020 year-on-year(y/y), compared to
growth of 5.4 percent in H1 of 2019. This 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 1.0
percent in 2020 in the baseline scenario, and by 1.5 percent
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. The special focus topic
finds that the pandemic increased poverty by 4 percentage
points (or an additional 2 million poor) through serious
impacts on livelihoods, by sharp decreases in incomes and
employment. The unemployment rate increased
sharply,approximately doubling to 10.4 percent in the second
quarter 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 1 in 3 household runbusinesses
are not currently operating, and between February and June
average revenue from household run businesses decreased by
almost 50 percent. This has exacerbated food insecurity, and
elevated pain and human suffering. 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. |
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