Lack of interventions to mitigate against the effects of climate change could see the Kenyan economy lose up to Sh3.7 trillion in output by 2050 according to a new World Bank (WB) Report.
The findings are based on the first Country Climate and Development Report published last week and assess key action points, to create a more resilient economy to maintain the vagaries of climate change.
The impact posed by climate change on output has been assessed under two scenarios; with the first case assuming that the country would retain its current average growth rate at five per cent, a scenario in which Kenya’s Gross Domestic Product (GDP) would have risen to about Sh52.4 trillion by 2050 up from the current Sh13.3 trillion.
In addition to the impact of climate change on growth, non-action on climate is seen dragging an additional 1.1 million people into poverty by 2050. The agriculture sector is expected to take the heaviest hit from the effects of climate change with the sector being mostly rain-fed, hence prone to damage to floods and droughts.
Without action to contain the effects meted by climate change, the WB says Kenya could miss out on its aspirations of being an upper middle-income country.
“Climate change could hamper Kenya’s aspiration of being an upper middle-income country (UMIC) by 2030 and set back expected gains in addressing poverty,” the World Bank notes in the report.
The livestock subsector would see the greatest losses under dry and hot weather with the conditions also seen elevating heat stress on labour productivity in an economy consisting of a significant number of jua kali sector workers who mostly work outdoors.
Damages on roads and bridges due to climate change are seen increasing people’s commute times to work, reducing labour hours and increasing capital and maintenance costs with flooding generally affecting infrastructure and physical capital.
A change in the structure of the economy to further reduce the domination of agriculture in output levels is deemed as part of solutions to mitigate against climate shocks, where the major sectors of the economy would be in the service and manufacturing industries. The WB terms this scenario as aspirational and which reduces the impact of climate change on output from a decline of Sh3.7 trillion or 7.25 percent of GDP in 2050 to 5.3 percent of GDP.
The loss of GDP under the scenario would be wider at a nominal Sh5.3 trillion but would be partly offset by a larger economy estimated at Sh101.2 trillion at current market prices.
“The aspirational scenario assumes that Kenya is a newly industrialising, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment, GDP grows at an average of 7.5 percent per annum, industry and services constitute a bigger share of the economy, and Kenya is more urbanised,” adds the report.
Agriculture remains the core of the Kenyan economy contributing to a mean one-fifth of the value added to GDP.
The World Bank Group has listed key action areas to contain the effects of climate change as improving integration of policy, planning, investing in decision-making across the economy and management of water, land and forests for climate-resilient agriculture and rural economies.
Others are delivering people-centred resilience using climate-informed basic services, strengthening Kenya’s competitiveness in international markets through shifts in energy, transport and digital systems and implementing policy measures for mobilising climate financing from private and public sectors.
“When considering the key investments needed for resilience that also help move Kenya toward a more resilient and green future, large sums are required. However, the additional investment needed to make the current growth scenario to be more resilient and have a green future is relatively modest,” the WB stated.