Economic Paper

 

 

 

 

 

Economic Paper

 

March 2021

 
 

Economic Recovery in a Covid-19 Pandemic Period

By

Njambi Kibe

 

 


 

 

Contents

1.1 Introduction. 3

1.2 Overview.. 3

1.2.1 Gross Domestic Product (GDP). 5

1.2.2 Economic Growth. 6

1.2.3 Consumer Price Index. 6

1.2.4 Inflation rates. 6

1.3 Impacts of Covid-19 on the Economy. 6

1.4 Kenya Economic Stimulus Program… 8

1.5 eCommerce and Digital market 9

1.6 Sectoral Analysis. 9

1.6.1 Tourism Sector. 9

1.6.3 Motor sector. 10

1.6.4Agricultural Sector. 10

1.6.5Education Sector. 10

1.6.6 Hospitality. 10

1.6.7Blue economy. 10

1.6.8Green Economy. 10

1.6.9 Financial Services sector. 10

     1.6.10 Women Economic Empowerment 10

1.7 Conclusion. 11

 

 

 

1.1 Introduction

The Central Organization of Trade Unions in Kenya COTU (K), in the National Labour centre of Kenya. The Central Organization of Trade Unions Kenya COTU (K) is the Umbrella body for workers with 50 affiliate unions that champion a decent and sustainable work environment.

COTU (K) ‘s mission is to develop a workforce that enjoys a decent work environment by promoting the creation of productive and sustainable employment opportunities, facilitating the achievement of workers’ rights, enhancing social protection, and providing effective representation to Kenyan workers. 

The economic paper provided details that the organization has collected to facilitate the creation of decent jobs, guarantee rights at work, extend social protection and promote social dialogue among the tripartite social partners. The economic paper projects a 10% increase in the minimum wage and a 10% increase in the general wage in 2021.

 

1.2 Overview

Kenya’s economy is a market-based economy connected to the external trade system and several state enterprises. As of 2020, Kenya had the third-largest economy in Sub-Saharan Africa, coming after Nigeria and South Africa. There are many industries, including agriculture, manufacturing, tourism, motor, e-commerce, financial services, and hospitality, among others.

 

 

 

 

Overview

Last

Reference

Previous

 

Frequency

 

GDP Growth Rate (%)

4.2

Sep/20

-8.2

 

Quarterly

 

GDP Annual Growth Rate (%)

-1.1

Sep/20

-5.5

 

Quarterly

 

Unemployment Rate (%)

7.2

Sep/20

10.4

 

Quarterly

 

Inflation Rate (%)

5.78

Feb/21

5.69

 

Monthly

 

Interest Rate (%)

7

Jan/21

7

 

Daily

 

Balance of Trade (Million KES)

-103947

Dec/20

-88253

 

Monthly

 

Corporate Tax Rate (%)

30

Dec/20

30

 

Yearly

 

Personal Income Tax Rate (%)

30

Dec/20

30

 

   

 

Source: COTU (K) Research Department

 

1.2.1 Gross Domestic Product (GDP) 

In September 2018, the economic projections were positive, with an estimate of 6% GDP growth. The growth is based on expansions in telecommunications, transport, construction, and economic recovery in agriculture. These improvements are supported by a large pool of highly educated professional workers. There is a high level of IT literacy and innovation, especially among young Kenyans.

Real gross domestic product (GDP) growth is projected to decelerate from an annual average of 5.7% in 2015-2019 to 1.5% in 2020. It is projected that if recovery from the Covid-19 Pandemic takes longer, GDP could decline by 1.0% in 2020. The slow recovery could contact the GDP growth to 2 % in 2021.

 

 

1.2.2 Economic Growth

Between 2013 and 2018, under the Jubilee Party government led by President Uhuru Kenyatta, GDP growth averaged above 5%. Growth in small businesses is credited with some of the improvements. Real GDP growth (annualised) was 5.7% in Q1 of 2018, 6.0% in Q2 2018 and 6.2% in Q3 2018. Despite this robust growth, concerns remain on Kenya’s debt sustainability, current account deficit, fiscal consolidation, and revenue growth.

In 2019, Kenya’s economic growth was estimated at an average of 5.7%. Kenya was rated among the fastest growing economies in the Sub-Saharan region of Africa. The government has facilitated economic expansion through a stable macroeconomic environment and positive investor confidence.

1.2.3 Consumer Price Index

In January 2021, the Consumer Price Index (CPI) in Kenya increased to 112.58 points, up from 111.87 points in the previous month. Growths on prices from food and non-alcoholic beverages and transports influenced the monthly expansion on the CPI. Since January 2020, the index has been gradually increasing in the country.

1.2.4 Inflation rates

Turmoil in the bond markets, improving economic indicators, and a raft of government aid are factors likely to influence inflation to rise to 7% in 2021. The projection is short-term due to the changes that ere as the Covid-19 pandemic subsides.

1.3 Impacts of Covid-19 on the Economy

Nationally, the number of workers declined drastically due to Covid -19, resulting in a decline in union membership. The COVID-19 pandemic has exposed deep-rooted atrocities that exist in labor markets. The pandemic and has further aggravated the abuse and exploitation of workers.

The Quarterly Labour Force Survey 3 2020 (QLFS) investigated the current situation in the labour market. The QLFS collected data about the Kenyan labour market events for the population aged above 5 years and below 64 years.  Topics that the survey covered include Employment, labour Force Participation Rates, Unemployment, and Labour Underutilization.

Indicator

Quarter 3, 2019

Quarter 2, 2020

Quarter 3, 2020

Population (15-64)

26,951,051

27,486,975

27,665,619

Labour Force

20,448,408

20,507,523

20,931,079

Employed

17,816,381

15,870,357

17,674,570

Employment/Population Ratio (%)

66.1

57.7

63.9

 

Unemployed

994,642 18,

1,841,918

1,368,606

Unemployment Rates

5.3

10.4

7.2

 

 

 

 

Source: Kenya National Bureau of Statistics, KNBS (2020)

It is estimated that 1,368,606 people lost their jobs in 2020. The job loss was due to companies’ closure regarding the economic crisis brought about by the Covid-19 pandemic and the environmental shocks.

Kenya’s economy has been highly affected by Covid-19 through supply and demand shocks on external and domestic fronts, with interruptions in the country’s recent broad-based growth path.

Apart from the COVID-19 coronavirus pandemic, a locust attack in early 2020 has affected many counties in Kenya, especially the North East. Further, Many Regions in the Country have experienced floods that have been persistent for a long time. Kenya has also faced the challenge of high-water levels in Lakes such as Lake Victoria and Lake Baringo. Environmental disasters have negatively impacted the food security and growth of the country’s agriculture sector.

1.4 Kenya Economic Stimulus Program 

Kenya’s government introduced the Kenya Economic Stimulus Program (ESP) in the 2010/2011 budget plan. The initiative aimed to stimulate economic activity in Kenya through investment in long-term solutions to food security challenges, rural unemployment, and underdevelopment. Its stated objective was to promote regional development for equity and social stability, improve infrastructure, enhance the quality of education, avail affordable healthcare for all Kenyans, invest in the conservation of the environment, and build.

In 2021 Kenya’s government introduced an Economic Recovery stimulus program as an emergency measure used to stimulate the economy and prevent it from tumbling into a deflationary spiral. The Ministry of Finance aimed to use this program to achieve regional development for equity and social stability.

 

 

1.5 eCommerce and Digital market

The Revenue in the eCommerce market is expected to reach Ksh. 300,000,000 M in 2021. Ecommerce revenue is expected to show an annual growth rate (CAGR 2021-2025) of 6.29%, resulting in a projected market volume of Kshs 350,500,000 M by 2025. The market’s largest segment is fashion and digital services and a projected market volume of Ksh. 85,000,000 M in 2021.  

 

In 2021 user penetration is projected to b 50.8% and is expected to hit 63.1% by 2025. The average revenue per user (ARPU) is expected to amount to Ksh. 78,277.52 M.

1.6 Sectoral Analysis

The Economic recovery in the new normal brought about by Covid-19 has diversified different sectors of our economy. Many changes have been implemented to protect the lives and health of workers. The coloured economy must be addressed in a segmented process to attain Economic independence. Blue economy, green economy, white gold, green gold are among sectors that need special focus.

1.6.1 Tourism Sector

In the first half of 2020, 45 percent of tourism businesses in Kenya estimated a revenue loss above 2.5 million Kenyan shillings as an effect of the coronavirus (COVID-19) pandemic. Roughly 23 percent indicated losing from 500 thousand to 1 million KSh, while approximately 15 percent of businesses pointed to a revenue loss above KSh. 5M.

1.6.2 Manufacturing Sector

 

 

1.6.10 Women Economic Empowerment

Today, less than half of the world’s economies have mandated equal remuneration for equal value work, and where laws restrict the jobs and hours that women can work, affecting 2.6 billion women. This occupational segregation has resulted in women being overrepresented in jobs that are more affected by COVID-19 disruptions, such as education, retail, tourism, hospitality, and domestic services.

 

 

 

 

1.7 Conclusion

The economy is on a recovery path and growing steadily in the new normal brought about by Covid-19. Workers drive the economy, and they will deliver projected growth through the working men and women’s efforts. The demand for an increment on the minimum wage and an increment on the general wage is to cushion the workers from the high cost of living and the inflation and other adverse impacts of Covid-19. In 2021 we have an opportunity to propel our economy together and rise above the new normal on a journey to a new economic paradigm.