Kenya’s Economy Shrinks by 5.7% in 2020 Q2 as Pandemic Hits Key Sectors
Kenya’s economy contracted by 5.7% in 2020 Quarter 2 compared to 4.9% in Q1 2020, after the pandemic affected multiple vital sectors. In Q2 2019, the Kenyan economy grew by 5.3%.
A report from the Kenya National Bureau of Statistics shows that slow economic activity adversely affected the stock exchange. The NSE 20 Share Index dropped from 2,633.3 points in June 2019 to 1,942 points in June 2020.
The Kenyan Shilling ceded against major currencies, with notable decline against the dollar (5.13%) and the Japanese Yen (7.47%) while gaining against the Rand by 15.5%
Analysis of Sectors in the Economy
Sectors That Grew
Measures to cushion the country against the effects of the pandemic, such as the closing restaurants, some businesses, and the restricted movements took a tool in the economy. Besides, lower taxes also drove the economic downturn further.
Accommodation and food services contracted by 83.3% versus 12.1%, following the closure of hotels and restaurants, and restrictions of movements into and within the country.
Kenya’s manufacturing sector contracted by 3.9% in Q2, while it expanded by 4% in Q2 2019. Manufacturing of food and beverages fell by 2.5% while that of non-food products fell by 4.9%. Lending to the sector grew by 16.9% compared t0 8.6% in the same period last year.
Growth in the construction sector slowed down to 3.9% compared to 7.2% in 2019 Q2. Cement consumption grew by 4.6% to 1,521 thousand metric tonnes between Q1 and Q2 2020.
The transport and storage sector contracted by 11.6% in Q2 compared to 7.6% in Q2 2019 following travel restrictions. Volume at the port fell by 10.5% to 7.752.8 thousand metric tonnes.
Freight volumes at the SGR grew by 3.9% to 1,053 thousand metric tonnes while passengers numbers on fell by a record 98.4% from 408,931 last year Q2 to 6,363 in 2020 Q2. The ban on international travel dropped passenger traffic at JKIA by 99.5% and while cutting traffic at Moi International Airport by 99.9%.
Economic Sectors That Declined
Agriculture, forestry and fishing grew by 6.4% in quarter two compared to a 2.9% in 2019 Q2, supported by increased cane deliveries (71.4%), milk intake (6%), tea production (34.5%) and fruit exports (34.8%).
However, the horticulture business recorded a decline, with vegetable exports dropping by 14.8% while flower exports falling by 34.5% following the closure of European markets.
Electricity and water supply contracted by 0.6% compared to an expansion of 7.3%. This follows a decline in electricity generated by 6.1%. Electricity from wind energy fell by 29.3% while hydropower grew by 34.5%.
Financial and insurance services grew by 4.2%, compared to 5.2% last year. Money supply expanded to Ksh 3.8 trillion compared to 3.5 trillion in Q2 2019.
Similarly, accommodative monetary policy to ease the effect of the pandemic on the economy grew domestic credit by 11.9% while expanding private sector credit by 7.67%. The Central Bank Dropped CBR to 7% in April, from 7.25% in March 2020. As a result, lending interest rates in banks fell from 12.47% in June 2019 to 11.89% in June 2020.