Delayed vaccines, new Covid curbs spell doom to second quarter growth prospects

Kenya’s economic growth in the second quarter is likely to be subdued due to delayed vaccines and effects of the latest Covid-19 containment measures.

A market update by AIB-AxysAfrica says that whereas the government has restricted inland travel, banned social gatherings, and extended curfew hours in the five counties around Nairobi, there lacks fiscal or monetary measures to help cushion Kenyans.

Many businesses have, however, turned to remote working a move that could lessen the overall impact, the report notes.

The Covid-19 pandemic has so far claimed over 3 million lives globally since it was first reported in China in December 2019. In Kenya, a total of 2,501 people has so far succumbed to the virus.

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“In 2021, economic growth is expected to accelerate. The World Bank and IMF growth estimates stand at 6.9 per cent and 7.6 per cent respectively. We, however, believe that these estimates are too optimistic. Delayed vaccine distribution, new lockdowns, and unsupportive fiscal policy dampen the country’s growth prospects. In our view, economic growth is likely to come in at 4 per cent,” said analysts at AIB-AxysAfrica.

The US, UK, India, Brazil and Italy are some of the countries, which have been hit hard by the virus recording millions of deaths.

In the three-month period to March, inflation increased to 5.90 per cent from 5.62 per cent. The country’s uptick in inflation was mainly driven by higher fuel prices as the retail price of super and diesel in Nairobi increased to KES122.81 and KES107.66 at the end of the quarter from KES 106.82 and KES 91.82 in January respectively.

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Meanwhile, the country’s core inflation declined to 2.3 per cent from 2.6 per cent as consumer demand declined.

This year, headline inflation is likely to edge higher riding on an uptick in food prices, increased global commodity prices, the depreciation of the Kenyan shilling against major currencies, and the relatively higher tax rates that had been lowered in 2020 as the government sought to cushion Kenyans during the onset of the pandemic.

Meanwhile, core inflation is likely to register a marginal increase but remain below 4 per cent.

“The country might not receive sufficient rainfall during the long rains season as depressed rainfall was recorded in March during the onset of the long rains season and so far sufficient rainfall hasn’t been received in April, which is supposed to be the peak of the season,” said AIB-AxysAfrica.

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