Economy

Services sectors expected to lead economic growth in the next year

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Economic growth concept. FILE PHOTO | NMG

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Summary

  • Economists at NCBA said in a macroeconomic outlook report that real estate, health care, education and financial services are also expected to revert to historical growth trends, but agriculture is likely to be negatively impacted by erratic weather conditions.
  • The hospitality sector was the worst hit by the pandemic, contracting by 48 percent in 2020 as tourism arrivals dried up and restaurants faced prolonged closures to mitigate the spread of Covid-19.
  • Already, the global economy has become jittery following the discovery of the Omicron strain of Covid, with some countries already reinstating travel restrictions and sliding back into restrictions.

Sectors such as hospitality, services and transport that were the hardest hit by the Covid pandemic are expected to lead the economy in growth in the next year as they reap the benefits of the eased Covid-19 restrictions and higher consumer spending.

Economists at NCBA #ticker:NCBA said in a macroeconomic outlook report that real estate, health care, education and financial services are also expected to revert to historical growth trends, but agriculture is likely to be negatively impacted by erratic weather conditions.

The hospitality sector was the worst hit by the pandemic, contracting by 48 percent in 2020 as tourism arrivals dried up and restaurants faced prolonged closures to mitigate the spread of Covid-19.

Signs of recovery have already been seen this year, especially in the second quarter, when the accommodation sector grew by 9.1 percent compared to a 56.8 percent contraction in the second quarter of 2020.

“The services sectors are expected to grow more than agriculture. We don’t expect to see the closure of the agriculture sector with a similar measure last year. We also see a slight contraction of agricultural activities this year due to harsh weather that could keep growth below the historical average,” said NCBA chief economist Raphael Agung’.

NCBA projects economic growth of 5.8 percent this year from an earlier estimate of 5.3 percent. It projects GDP growth to hit 5.2 percent in 2022 driven by the continued rise in demand and spending in the economy.

Risks however remain, such as inflation, global supply shocks, higher taxes, a weak exchange rate and the emergence of new Covid strains.

Already, the global economy has become jittery following the discovery of the Omicron strain of Covid, with some countries already reinstating travel restrictions and sliding back into restrictions.

Political uncertainty also remains a concern ahead of the 2022 general elections, although NCBA remains optimistic that the elections would not reverse any investments made in the past and any slowdown would be reversed quickly following the polls.

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