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  • Writer's pictureAnzetse Were

Report: State of the Kenyan economy- Focus on Digitisation and the impact of COVID-19 on MSEs

This report was published by FSD Kenya on June 29, 2021. Anzetse Were co-authored the report.


Description


The COVID-19 pandemic, (the Great Disruption) hit the global economy in 2020.

  • Whereas 2020 was defined by divergent impact within and between economies, 2021 will be defined by multispeed and divergent recovery in the global and local economy.

  • Rich economies and China are set for a strong recovery led by the USA, mainly linked to their willingness to support incomes and deploy unprecedented fiscal and monetary support, and quick COVID-19 vaccine roll-outs which have muted the extremities of sustained economic contractions.

  • Low-income countries however face grimmer economic prospects due to limited access to COVID-19 vaccines and weak public finances; they will suffer more significant medium-term losses, particularly countries that rely on tourism and commodity exports, and those with limited policy space to respond.

  • In Kenya, divergence trends continue with macroeconomic resilience masking sustained inequalities and divergence in recovery. On one hand, inflation remains reasonable; export performance has been relatively strong (especially relative to other African countries); diaspora remittances have been robust; and the mobile money sector has demonstrated sustained resilience and growth.

  • On the other hand, inflation continues to disproportionately affect low-income groups; key sectors such as tourism remain deeply affected; and job recovery has been weak. Further, there are already signs of economic stress emerging linked to the March 2021 lockdown.

  • Local fiscal dynamics have been defined by continued financing requirements to mitigate the health and socio-economic effects of COVID-19 juxtaposed with fiscal stress linked to sustained underperformance in revenue generation; unsustainable debt levels; and high debt servicing costs.

  • Global developments include new global debt relief and restructuring efforts (DSSI extension, IMF SDR allocations and the creation of the Common Framework for Debt Treatments)

Download the report here:

State-of-the-Economy-Q1-2021
.pdf
Download PDF • 5.96MB


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