Treasury, IMF differ on economic growth status

The International Monetary Fund (IMF) and the Treasury have differed on whether Kenya’s economy contracted last year in the wake of Covid-19 pandemic.

IMF officials who concluded talks for budget support loan with Treasury officials on Monday predicted the Kenyan economy contracted by 0.1 per cent last year on the negative impact of the coronavirus pandemic lockdowns.

Separately, Treasury expects growth at 0.6 per cent on slight recovery at the end of the year following two consecutive quarters of contraction.

“Economic growth is estimated to slow down to around 0.6 per cent in 2020 from the earlier projection of 2.6 per cent in the 2020 Budget Review and Outlook Paper (BROP),” Treasury Cabinet Secretary (CS) Ukur Yatani said yesterday in the Budget Policy Statement for 2021.

The Treasury said they arrived at the estimates following receipt of more recent indicators and taking into account the quarterly GDP releases by Kenya National Bureau of Statistics for second and third quarter of 2020 that showed the economy contracted by 5.5 percent and 1.1 percent, respectively.

CS Yatani said the revision also took into account updated figures from the World Economic Outlook by the IMF in January.

IMF, however said Kenya had a modest recovery since reopening of the economy in the second half of the year, but still experienced a contraction.

“Real GDP growth is projected to have contracted by just -0.1 percent in 2020,” said Mary Goodman of the IMF.

The last time Kenya recorded a negative growth was in 2000 at -0.3 per cent.

IMF however project that the economy will rebound sharply this year as the virus is contained and the overall effect of reopening schools.