This report was first published by FSD Kenya on February 22, 2021.
This report provides an update of the economy and is part of the updates on the impact of COVID on the macroeconomy, MSMEs and households.
Key insights:
• The economic impact of COVID-19 has had diverse and specific effects on
demographic groups and sectors. On one hand macroeconomically Kenya has demonstrated resilience compared to peer economies in particular. This is linked to Kenya’s diversified economy, robust agricultural production, recovery in key export items, robust diaspora remittances, little reliance on the export of energy and metal commodities, as well as government interventions to mitigate the impact of the pandemic.
• The sectoral impact of COVID has been pronounced, particularly on the tourism, accommodation and food services; education; wholesale and retail trade; and manufacturing. The bulk of these sectors are labour intensive with the manufacturing sector being an important source of formal employment. As a result, 2021 will likely be defined by job losses in the formal sector not necessarily being reinstated, leading to growing numbers of Kenyans shifting to informal and ‘gig’ economic activity.
• 2021 will also be defined by income divergence and economic dualism with short term resilience at the middle- and upper-income layers juxtaposed with an increasingly vulnerable swathe at the bottom of the income pyramid. For lower-middle- and lower-income populations, there will continue to be longer term vulnerabilities due to eroded assets, savings and social networks. Low-income Kenyans will face heightened
social and economic insecurity including food insecurity for the poorest and most vulnerable populations.
• On the other hand, there will be a thinning layer of upper and upper-middle income Kenyans able to retain jobs and business activity due to sectoral exposure that will show stronger signs of recovery. However, they will likely continue to exhibit limited appetite for spending due to increased requests for financial support from their social network, economic uncertainty and choosing to save rather than spend or make new investments.
• This divergence is seen digitisation trends where internet usage during COVID is strongly correlated with income level.
Download the report here: