The Impact of Covid-19 To the Kenyan Economy Student’s Name
Institution
The Impact of Covid-19 on Kenyan Economy
Introduction
The Covid-19 virus has caused a convulsive shock to the global economy. There remains considerable uncertainty around the pathway of the pandemic, the means and...
The Covid-19 virus has caused a convulsive shock to the global economy. There remains
considerable uncertainty around the pathway of the pandemic, the means and speed of any
economic recovery and what structural changes – particularly to the globalization of trade and
capital – it will bring in the longer-term.
The pandemic is already radically worsening the economic outlook for Africa, with
growth expected to collapse to a negative 1.6% and a real per capita fall of 3.9%, making 2020
the worst year since records began in 1970 for the continent's economic growth. Poverty is also
expected to increase by 2% of the regional population, with 26 million people falling under the
poverty line, erasing five years of progress in poverty reduction. Half of the new poor will live in
just five countries: The Democratic Republic of Congo, Ethiopia, Kenya, Nigeria and South
Africa – with Nigeria contributing the most with 6.6 million according to unpublished World
Bank material.
Since the first case of Covid-19 in Kenya, the markets have been showing poor trends as
many investors pull out from the Nairobi Stock Exchange market. This paper looks at the trends
that has been existing in the Nairobi Stock Exchange market from the NSE-20 Share Index. The
trend should help you in making an informed decision especially when looking for returns on
investment from Nairobi Stock Exchange market in the year 2020.
Economic Impulse and the Diseconomies of Covid-19 in Kenya
Kenya’s gross domestic product (GDP) is projected to decelerate substantially in 2020
due to the negative impact of the COVID-19 (coronavirus) pandemic. Economic growth
projection remains highly uncertain and the outcome will hinge on how the pandemic plays out
, internationally and within Kenya, along with policy actions taken to mitigate the situation. The
latest World Bank Kenya Economic Update (KEU) predicts growth of 1.5 percent in 2020 in the
baseline scenario, with a potential downside scenario of a contraction to 1.0 percent, if COVID-
19 related disruptions in economic activity last longer.
The government’s immediate action has focused on strengthening the health system
which faces an extraordinary challenge to contain the spread of COVID-19 and care for the
infected. Further health policy measures such as working from home, travel restrictions, the
closure of schools, the suspension of public gatherings, and a nightly curfew, are necessary to
delay the spread while the country ramps-up investment in its healthcare systems. Nonetheless,
they are also quite costly to the economy by reducing social interaction, production and demand
across all sectors.
The hardship from the crisis would disproportionately befall the poorest and the most
vulnerable households in Kenya. Many of these depend on farming (for the rural), self-
employment and informal wage (for the urban). Protecting their earnings and reaching
households through cash transfers is considerably more challenging due to a nascent system of
social safety nets, lack of proper physical address system, and updated welfare registers. It is
critical, therefore, for the country to scale up available social assistance programs to provide poor
households with food, water, and other basic supplies to cope with the crisis. It is also important,
to customize COVID-19 spread containment measures to reflect local context and peculiar
constraints faced by government such as limited fiscal space, and much less operational capacity
to respond to help households and firms weather the crisis.
Kenya’s medium-term growth is projected to rebound fast (to about 5.6 percent over the
medium term), on assumption that investor confidence will be restored soon after the COVID-19
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