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Kenya slides into Recession for the first in 20 years

Kenya slides into Recession for the first in 20 years
Kenya slides into Recession for the first in 20 years

Kenya drifts into a recession for the very first time in the last  20 years in the third quarter of 2020 as measures introduced by the authorities of the East African state to curb the spread of the Covid-19 pandemic has a drastic effect on the economy.

Gross domestic product in East Africa’s greatest economy dropped to 1.1% compared to the previous year, after shrinking a revised 5.5% in the 2nd quarter, the Kenya National Bureau of Statistics disclosed this on Thursday via an e-mail. The outcome matched a median of three economists’ estimates in a Bloomberg survey.

Prior to the decline in the second quarter, the economy last contracted in the third quarter of 2008, when post-election violence led to a 1.6% drop in output, according to the statistics office. The agency only started publishing quarterly GDP data in 2000.

Kenya’s economy contracted for a second straight quarter
Kenya confirmed its first coronavirus infection in mid-March which was followed by a partial lockdown. Closures of some of the major market such as the European Union and the U.K. as well as global travel restrictions struck the nation’s main foreign-income earners, including tourism and exports of tea, flowers, fruit and vegetables.

Agriculture, which makes up a 3rd of GDP, expanded by 6.3%, compared to a 7.3% growth in the April-to-June period. Tea production and favourable weather aided the increased to 14 per cent in the quarter compared with the previous year. Kenya remains the world’s biggest exporter of the black variety.

Education and accommodation and food services, which suffered the most during the nation’s lockdown, contracted by 42% and 58% respectively. That compares with a contraction of 56% and 83% respectively in the second quarter.

Education’s decline was deeper and a bigger drag on growth in the second and third quarters than expected, said Yvonne Mhango, the sub-Saharan Africa economist at Renaissance Capital. The brokerage anticipates to reduce its 2020 growth estimate from 1.5% but maintains 4.2% for this year, she stated.

The World Bank sees Kenya’s economy rebounding to the growth of 6.9% in 2021, from an estimated 1% contraction last year, according to the lender’s latest Global Economic Prospects report.

The country’s Treasury estimates GDP managed to increase in 2020, by 0.6% and said the expansion could pick up to 6.4% this year, before slowing to about 5.5% in 2022 due to the uncertainty wrought by elections scheduled for that year.

Source: Bloomberg

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