Kenya’s economy has rebounded and is now above the pre-Covid levels with the gross domestic product (GDP) expanding 6.8 percent in the first quarter of this year.
The growth is in line with the market sentiments from the local business community who expect for the first time in many election years the economy to shrug off election shocks and get out of August 9 unscathed.
The Kenya National Bureau of Statistics (KNBS) data released last week shows the GDP was up from 2.7 percent last year and 4.4 percent in 2020 on recovery in the transport, food and service sectors.
The sectors flourished as a result of the reopening of the economy against when Covid-19 curbs were in force to contain the spread of the disease.
Agriculture, Kenya’s economic mainstay, however, contracted in the first quarter due to depressed rainfall during the fourth quarter of 2021 as well as delayed onset of rains during the quarter under review.
The Treasury estimates the economy will grow at six percent this year, driven by strong growth in services and expansion in industrial output.
But despite the optimism and the resilience that the economy is showing, there is an emerging twin threat from the runaway inflation and the depreciation of the Kenyan shilling, which if remained unchecked, will wipe out any gains made in the first quarter.
Kenya’s inflation hit 58-month high in June, rising to 7.9 percent from 7.1 percent in May, driven by soaring food prices. This has already breached the government’s upper limit ceiling for the first time in nearly five years and further squeezing stagnant earnings of households.
This is the first time year-on-year cost of living measure crossed the upper limit target of 7.5 percent since August 2017, another election year, when it climbed to 8.04 percent on a biting drought.
The weakening of the home currency, which is racing towards the 120 mark against the dollar, is increasing the cost of imports and debt repayments.
It is time for the relevant actors in charge of the monetary policy and fiscal policy to find a middle ground on how to protect the economy that already has the political pressure to deal with.
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