ECONOMIC OUTLOOK ACCORDING TO THE ECONOMIC SURVEY 2021

The economic survey report is prepared annually by the Kenya National Bureau of Statistics

The Kenya National Bureau of Statistics (KNBS) is the principal agency of the Government for collecting, analyzing and disseminating statistical data, and the custodian of official statistical information. The Bureau is also responsible for the co-ordination of the National Statistical System (NSS) in the country

The functions of the KNBS as defined in the Statistics Act No. 4 of 2006 are: –

  • Planning, authorizing, coordinating and supervising all official statistical programmes undertaken within the national statistical system
  • Establishing standards and ensuring the use of best practices and methods in the production and dissemination of statistical information across the national statistical system
  • Collecting, compiling, analyzing, abstracting and disseminating statistical information on the matters specified in the First Schedule
  • Conducting the Population and Housing Census every ten years, and such other censuses and surveys as the Board may determine
  • Maintaining a comprehensive and reliable national socio-economic database. – Developing and maintaining sampling frames of the Bureau
  • Collaborating with and assisting the county governments or any other institutions in the production of official statistics
  • Providing technical advice on statistics to other state entities
  • Promoting co-ordination among producers, users and suppliers of official statistics by forming appropriate sector committees
  • Designating statistics produced by national statistical system as official statistics on being satisfied that the necessary criteria have been followed.

Some of the statistical products of the Bureau include

  1. Consumer Price Index (CPI)
  2. Leading Economic Indicators report
  3. Quarterly Gross Domestic Product Leading Economic Indicators report
  4. Quarterly Gross Domestic Product (GDP) release
  5. Quarterly Labour Force Survey (QLFS) release,
  6. Quarterly Producer Price Index (PPI)
  7. Quarterly Balance of Payment release
  8. Annual Economic Survey report,
  9. Annual Statistical Abstract
  10. County Statistical Abstract

The Bureau also provides information to local and international organizations including the IMF, World Bank, UN, COMESA, ILO and EAC; and other data users. The Bureau maintains various platforms through which its products and statistical information are disseminated. The Bureau provides information for monitoring the country’s development agenda as well as the international agreed indicators such as the Sustainable Development Goals (SDGs).

Economic outlook In the international scene

 World real GDP contracted by 4.2 per cent in 2020 compared to a growth of 2.7 per cent in 2019. The contraction was mainly attributed to slowdown in economic activities due to emergence of the Coronavirus Disease 2019 (COVID-19).

 Real GDP in Advanced Economies is estimated to have contracted by 5.8 per cent in the period under review compared to 1.7 per cent growth in 2019. This was due to accelerated collapse in economic activity driven by sharp declines in demand and supply of services.

Sub Saharan Africa economies contracted by 1.9 per cent in 2020 compared to a real GDP growth of 3.2 per cent in 2019. East African Community (EAC) real GDP contracted by 0.2 per cent in 2020 compared to a growth of 6.2 per cent recorded in 2019. Global inflation eased from 3.5 per cent in 2019 to 3.2 per cent in 2020 largely due to significant decline in oil prices.

 World trade volume contracted by 10.3 per cent in 2020 compared to 1.0 per cent growth in 2019, a reflection of pronounced weakness in aggregate demand. The decline in trade volume was as a result of lockdowns and restriction of movements coupled with border closures that notably constrained consumption of a wide variety of goods. World current account surplus as a percentage of GDP narrowed from 0.5 per cent in 2019 to 0.2 per cent in 2020. This was mainly attributed to weak external demand and decline in oil prices.

Global employment levels deteriorated substantially during the review period. Unemployment rate stood at 6.5 per cent in 2020 from 5.5 per cent in 2019.

United States of America: The USA economy registered a contraction of 3.7 per cent in 2020 compared to a real GDP growth of 2.2 per cent in 2019. The contraction was attributed to a slump in personal spending, exports and business investment. Activity in restaurants, shopping centres and movie theatres were greatly affected. Unemployment rate rose by 4.6 per cent during the year under review to stand at 8.1 per cent. The current account deficit as a percentage of GDP was 3.4 per cent in 2020 compared to a deficit of 2.2 per cent in 2019.

United Kingdom: The United Kingdom economy contracted by 11.2 per cent in 2020 compared to a growth of 1.3 per cent in 2019. This was the largest annual contraction since the great frost of 1709.

 The contraction was attributed to weak business investment and subdued private consumption due to COVID-19 containment measures. Inflation increased to 5.9 per cent in 2020 compared to 2.1 per cent in 2019. The unemployment rate worsened by 0.8 percentage points to 4.6 per cent in 2020. The current account deficit expressed as a percentage of GDP narrowed to 2.6 per cent in 2020 from a deficit of 4.3 per cent of the GDP in 2019.

Japan: Despite effective management of COVID-19 coupled with fiscal support, Japan’s economy contracted by 5.3 per cent in 2020 compared to a growth of 0.7 per cent in 2019. The contraction was majorly attributed to a decline in household consumption, slowdown in external demand and private investment due to uncertainty brought by the COVID-19 pandemic.

 During the review period, inflation rate was 0.9 per cent compared to 0.6 per cent recorded in 2019. The unemployment rate rose to 2.8 per cent in 2020 compared to 2.4 per cent reported in 2019. The current account surplus as a percentage of GDP narrowed to 3.0 per cent in 2020 from 3.6 per cent in 2019. 

Germany: Germany recorded 5.5 per cent contraction in 2020 compared to a real GDP growth of 0.6 per cent in 2019. Subdued external demand was the key contributor to the contraction as major trading partners were severely affected by the COVID-19 pandemic. Substantial fall in business investment was also responsible to the contraction although construction activity largely remained resilient.

 Despite the Government implementing measures such as short– time employment offers to reduce permanent layoffs, the unemployment rate worsened to stand at 4.2 per cent in 2020 compared to 3.1 per cent in 2019. The current account surplus as a percentage of GDP narrowed by 0.2 per cent to stand at 7.0 per cent in 2020 from 7.2 per cent in 2019

Brazil, Russia, India, Indonesia, China and South Africa: The emerging economies of Brazil, Russia, India, Indonesia, China and South Africa (BRIICS) recorded an average contraction of 2.9 per cent in 2020 compared to a real GDP growth rate of 3.0 per cent in 2019. Inflation rate eased to 3.2 per cent in 2020 compared to 3.7 per cent in 2019. Current account deficit as a percentage of GDP improved to 0.9 per cent in 2020 from a deficit of 2.8 per cent in 2019. The economy of Brazil contracted by 4.1 per cent in 2020 compared to a real GDP growth of 1.1 per cent in 2019. The contraction was attributed to the plunge in domestic demand and weakened investment due to uncertainty brought about by the COVID-19 pandemic. The Russian economy registered a contraction of 3.1 per cent in 2020 compared to a growth of 1.3 per cent recorded in 2019.

The contraction was occasioned by a drop-in export, investment activity and consumer demand coupled with the collapse in global oil demand and concerns about oil storage capacity. Inflation rate stood at 3.4 per cent in 2020 compared to 4.5 per cent in 2019.

 The Indonesian economy experienced its first recession since 1998 by registering a contraction of 2.1 per cent in 2020 compared to a real GDP growth of 5.0 per cent in 2019. Inflation eased to 2.0 per cent in 2020 compared to 2.8 per cent in 2019. The current account deficit as a percentage of GDP narrowed to 0.4 per cent in 2020 compared to 2.7 per cent in 2019.

  China reported a stronger than expected real GDP growth of 2.3 per cent in 2020 compared to a growth of 6.1 per cent in 2019. Despite being the first country to report COVID-19, China was the only country in the BRIICS that recorded a positive GDP growth. The growth was boosted by investment, in particular, debt and stimulus fueled infrastructure investment coupled with increased external demand for masks and other COVID-19 related materials and equipment.

 Inflation eased slightly to 2.4 per cent in 2020 from 2.9 per cent recorded in 2019. Current account surplus as a percentage of GDP increased to 2.0 per cent in 2020 compared to 1.0 per cent recorded in 2019. India recorded a contraction of 8.0 per cent in 2020, one of the steepest contractions among the G20 economies particularly in the second quarter of 2020, from 4.2 per cent growth in 2019. While agriculture sector benefited from favorable weather conditions, the depressed performance was occasioned by one of the tightest lockdowns, which affected manufacturing and service sectors.

 Inflation stood at 6.2 per cent in 2020 compared to 4.8 per cent in 2019. Current account surplus as a percentage of GDP was 1.0 per cent in 2020 compared to a deficit of 0.9 per cent in 2019. 1.18. The South Africa economy contracted by 7.0 per cent in 2020 compared to a real GDP a growth of 0.2 per cent in 2019.

The contraction was attributed to low household consumption and restrained private investment triggered by the stringent COVID-19 containment measures and frequent power outages. South Africa suffered the most severe COVID-19 outbreak in Sub-Saharan Africa which prompted strict containment measures that consequently led to very low economic activity for the better part of 2020. Inflation stood at 3.3 per cent in 2020 from 4.1 per cent in 2019. The current account surplus as a percentage of GDP stood at 2.2 per cent in 2020 compared to a deficit of 3.0 per cent in 2019.

Sub-Saharan Africa: Sub-Saharan Africa’s real GDP is estimated to have contracted by 1.9 per cent in 2020 compared to 3.2 per cent growth in 2019 owing to COVID-19 pandemic in the region which negatively affected a number of activities such as tourism earnings, international trade and debt burden level. Inflation rose from 8.5 per cent in 2019 to 10.8 per cent in 2020; reflecting higher food prices, impact of currency depreciation and COVID-19-related disruptions to local and imported food supplies. Current account deficit as a percentage of GDP slightly increased to 3.7 per cent in 2020 from 3.6 per cent recorded in 2019. The widening of the deficit was majorly due to decline in exported goods especially for the oil exporting countries, increase in importation of medical supplies and postponement of direct investment by foreigners.

East African Community: East African Community (EAC) real GDP contracted by 0.2 per cent in 2020 from a growth of 6.2 per cent recorded in 2019. COVID-19 affected the East Africa Community members in many ways such as having negative effects on tourism earnings, falling commodity prices and waning financial flows, consequently worsening the region’s fiscal and current account balances.

 In addition, disruptions in supply chains affected food production and trade distribution in the region. Inflation rose from 4.0 per cent in 2019 to 4.5 per cent in 2020; partly due to currency depreciation and increase in prices of imported food products. Current account deficit widened to 5.7 per cent in 2020 from 5.2 per cent recorded in 2019, partly attributed to low demand for exports and decline in remittances.

 Tanzania’s real GDP is estimated to have grown by 1.0 per cent in 2020 compared to 7.0 per cent growth in 2019. Rwanda’s economy contracted by 0.2 per cent in 2020 compared to 9.4 per cent growth in 2019 with her current account deficit as a percentage of GDP narrowing from 12.4 per cent in 2019 to 12.2 per cent in 2020. Uganda’s economy is estimated to have contracted by 2.1 per cent in 2020 compared to a growth of 6.7 per cent in 2019. Inflation rate stood at 3.8 per cent during the review period compared to 2.9 per cent in 2019. The current account deficit as a percentage of GDP widened to 9.1 per cent compared to a deficit of 6.5 per cent in 2019.

Southern African Development Community: Southern African Development Community (SADC) recorded a contraction of 4.9 per cent in 2020 compared to a growth of 1.2 per cent in 2019. The contraction was majorly attributed to slowdown in activities as a result of the COVID-19 pandemic. South Africa, the largest economy in the region was the worst hit by the pandemic as strict containment measures were implemented to curb the spread of the COVID-19. Inflation rose from 9.6 per cent in 2019 to 12.2 per cent in 2020, mainly due to easing of monetary policies and reduction in government expenditure. Current account deficit as a percentage of GDP widened from 2.3 per cent in 2019 to 4.2 per cent in 2020, which is beyond the 3.0 per cent macroeconomic convergence target set for the region.

West African Economic and Monetary Union: Real GDP of West African Economic and Monetary Union (WAEMU) is estimated to have grown by 1.1 per cent in the year 2020 compared to a growth of 6.0 per cent in the 2019. The decelerated growth was mainly attributed to onset of COVID-19 pandemic in early 2020 which halted most of economic activities in the region. The slowdown was evidenced in reduction in tourism earnings and decline in prices of exported commodities; majorly oil and metals. Current account deficit as a percentage of GDP widened from 5.0 per cent in 2019 to 5.8 per cent in 2020. Inflation increased to 2.2 per cent in 2020 compared to 0.6 per cent recorded in 2019, reflecting increase in prices of imported food products as disruptions in global supply continued during the review period.

Central African Economic and Community: Real GDP of the Central African Economic and Monetary Community (CEMAC) Monetary is estimated to have contracted by 3.1 per cent in 2020 compared to a growth of 2.0 per cent in 2019. The contraction was mainly as a result of major slowdown in most of activities coupled with collapse of oil prices. Current account deficit as a percentage of GDP widened from 2.8 per cent in 2019 to 7.5 per cent in 2020, partly attributed to increase in prices of imported food products. Equatorial Guinea’s economy recorded the biggest contraction of 5.8 per cent mainly owing to collapse in oil prices.

Economic performance of Kenya

Real Gross Domestic Product (GDP) is estimated to have contracted by 0.3 per cent in 2020 compared to a growth of 5.0 per cent in 2019.

The contraction was spread across all sectors of the economy but was more dismal in accommodation and food serving activities, education, professional and administrative service activities.

 Agriculture, Forestry and Fishing activities were however more vibrant in 2020 despite a contraction in global demand in 2020. The sector grew by 4.6 per cent in 2020 compared to 2.3 per cent growth in 2019.

Manufacturing sector growth slowed down from 2.8 per cent in 2019 to 0.2 per cent in 2020. Despite most sectors recording contraction in growths, the economy was somewhat supported by accelerated growths in agricultural production (4.8 per cent), construction activities (11.8 per cent), financial and insurance activities (5.6 per cent) and health services activities (6.7 per cent).

In the review period, monetary policy was premised on the need to cushion the economy from the adverse effects of the COVID-19 pandemic containment measures, supporting liquidity and credit access. Central Bank Rate (CBR) was reviewed downwards from 8.50 per cent in November 2019 to 8.25 per cent in January 2020 and maintained 7.00 per cent until the end of 2020. The weighted average interest rates for commercial bank loans and advances declined from 12.24 per cent in 2019 to 12.02 per cent in 2020.

Agriculture remained the dominant sector, accounting for 23.0 per cent of the total value of the economy in 2020. Industry related activities accounted for 17.1 per cent of the total contribution in GDP growth in the same period.

Nominal GDP increased from KSh 10,255.7 billion in 2019 to KSh 10,753.0 billion in 2020. Similarly, gross domestic expenditure at current prices increased from KSh 11,123.0 billion in 2019 to KSh 11,667.7 billion in 2020.

 Gross National Disposable Income increased from KSh 10,630.4 billion in 2019 to KSh 11,100.4 billion in 2020. Gross domestic product per capita in constant prices however declined from KSh 183,664.1 in 2019 to KSh 179,021.6 in 2020.

In conclusion the there is optimism that with easing of COVID -19 restrictions measures that the world economy will improve as economic activities will be realized in full potential even as businesses fight to ways to adapt to the effects of the pandemic and to stay competitive. The question we all ourselves is will the world be the same again with pandemic???

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