Two million slide into grinding poverty as Kenya slips into recession

Two million slide into grinding poverty as Kenya slips into recession. The Covid-19 pandemic has impoverished an additional two million Kenyans. A new report by the World Bank reveals.

With a growing unemployment, the development is a setback to the poverty reduction efforts. Efforts that have been made in the last five years.

The report, which confirms that Kenya has slipped into a recession. This projects that the economy will contract by one per cent this year.

However, Treasury says the growth projection for 2020 is 0.6 per cent, and not 2.9 per cent as was captured in the Economy Recovery Strategy report.

The economy contracted by 5.7 per cent in the second quarter. This would require a significant growth in the remaining period to offset this decline.

That looks highly unlikely, given the current conditions.

“The global economy is tipped for a deep recession in 2020, with significant and potentially more prolonged negative spillovers on Kenya,” says the “Kenya Economic Update, November 2020.”

It adds that the coronavirus crisis has wiped out the recent gains the country has made in fighting poverty.

“The pandemic increased poverty by four percentage points through impacts on livelihoods and sharp decreases in incomes and employment,” the report made public yesterday says.

It adds that joblessness has gone up sharply. Approximately doubling to 10.4 per cent in the second quarter. This was measured by the Kenya National Bureau of Statistics Quarterly Labour Force Survey.

Reduced average revenue 

Those still employed face reduced working time, with average weekly hours decreasing from 50 to 38.

Almost a third of household-run businesses are not operating.

Worse still, the average revenue from household-run businesses reduced by almost 50 per cent between February and June.

“This has exacerbated food insecurity and elevated suffering,” the report says.

Almost all companies experienced a decline in sales.

The World Bank says 93 per cent of companies reported a reduction in sales in the last 30 days compared to the same period in 2019. While only two per cent reported an increase.

It adds that more than one in five businesses in Kenya laid off employees.

As a result, the World Bank has revised its economy projections for Kenya.

The institution expects the economy to contract by one per cent in 2020 in the baseline scenario, and 1.5 per cent in a more adverse case.

“This revision essentially adopts the adverse scenario outlined in the April 2020 update. This reflects the more severe impact of the pandemic to date than had been initially anticipated. This includes on the measured output of education following the March closure of learning institutions,” the report says.

The poor state of affairs explains why Kenya is hard pressed to renegotiate its mounting debt.

The country plans to seek a moratorium from foreign lenders to enable it navigate the economic headwinds.

“Tax revenue dropped below target due to the slowdown in the economic activity. As well as tax relief as part of the fiscal response package by the government,” it says.


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