Covid-19 shock on the economy is one of its kinds. It combines both supply and demand shocks. Previously, economic shocks have always been mostly in the supply side and specific sectors that eventually spiral to the rest of the economy. The most recent economic collapse, the Global Financial crisis of 2007–2008 was triggered by severe contraction of liquidity in global financial markets that originated in the United States as a result of the collapse of its housing market, and this threatened to destroy the international monetary system .
The supply shock reduces the economy’s capacity to produce goods and services at given prices. On the other hand, a demand shock reduces consumers’ ability or willingness to purchase products and services at given prices . The COVID19 shocks have affected Kenya’s economy in several ways. They include contraction of the economy, productivity losses, and welfare losses.
Contraction of the Economy
Analysis of Kenya’s economic rates shows that years 1992, 1993,1997,2000,2002,2008 and 2020 have population growth growing above economic growth rates. Most of the shock years are election and drought years. The preliminary data so far indicates that Kenya’s economy will contract in 2020 by -0.3%. However, the contraction could be as high as five per cent. The contraction rivals the contraction of 1992. Over the 30 years, the years 1992, 2008, and 2020 will be the most difficult in recent Kenya’s history. Both 1992 and 2008, Kenya witnessed election skirmishes. The post-election violence in 2007/2008 was of greater magnitude. A severe fall in economic growth rates will affect incomes significantly.
Social Welfare Losses
In its reports, the IMF mentions that almost all households surveyed in Kenya said that their income decreased, and about half said that they are “cooking less frequently” and “altered their diet .” The KNBS in a comprehensive national survey found out that almost 22 per cent of households reported without having food stock. The 22 per cent of households translates to nearly 2.67 million households or an estimate of 10.7 million Kenyans.
Productivity Losses
Various sectors have reported a loss in the number of hours worked. From the chart below, the service sector has lost more hours compared to manufacturing. The COVID19 can explain the loss of hours in the service sector especially in the hospitality industry.
The number of hours lost translates to productivity losses. The education sector has suffered a more significant number of hours because of the complete shutdown of schooling in Kenya. Employees in the education sector, utilities, hospitality, and construction have lost more hours because of physical distancing requirements in the Industry. Kenya’s service sector firms are more productive than manufacturing firms.
The loss in hours worked can be seen in the decline in electricity consumption. A month to month comparison between 2019 and 2020 shows significant reductions in Kenya Power and Lightening Company electricity sales in April, May, and June. KPLC electricity sales declined by 14% in April, 11% in May and 1% in June compared to the same months last year.
The principal managers of the Kenya economy should take a more targeted approach with its new pandemic aid. Already, they had been proposals fronted by the Economist David Ndii that included the proposal for a lifeline fund, expanding community safety nets amongst others. These kinds of spending could involve stretching the budget deficits. Other Economists believe that Central Banks may find it appropriate to shrink the size of their balance sheets .
The observations highlighted here are not conclusive as more effects will be clearer as the year comes to a close. However, policymakers should continue to keep an eye on the evolution of the Pandemic and its effects. They should take a more targeted approach. Policymakers should devise specific social welfare infrastructure that can target the population already rendered vulnerable by the Pandemic. Proposals such as the ones advanced by renowned Kenya Economist David Ndii are critical to reviving the economy and social safety nets to cushion against welfare losses. The topmost priority now is to deal with the public health crisis; which is suppressing the infections.
Endnotes
Case Adjournments is one of the key issues that contributes to case backlogs because it reduces the efficiency of courts. An adjournment in a legal setting involves pausing or temporally stopping ongoing proceedings to be continued at a later time, date, or location. It may also indicate the end of the day’s proceedings. Parties involved […]
Introduction In February 2023, the Kenyan government announced its intention to establish a framework that will enable Savings and Credit Cooperative Societies (SACCOs) to extend loans to each other. This inter-Sacco lending framework shall be set up by the Sacco Societies Regulatory Authority (SASRA) and was anticipated to be in effect from August 2023. This […]
While Kenya has long implemented the NHIF (National Hospital Insurance Fund) whose core mandate is to provide medical insurance coverage to all its members and their declared dependants and also to make medical care affordable, enrolment rates, particularly in the voluntary and informal sectors, remain low. Yet, NHIF is the most common type of health […]
Introduction According to the United Nations, Double Taxation Agreements (DTAs) are “bilateral agreements between two countries which allocate taxing rights over income between those two countries thereby preventing double taxation of income. The main objective of DTAs therefore, is to prevent and or eliminate avoidance and evasion of taxes on income and capital by both […]
Courts as Monopolies Access to justice is fundamental in any democratic society, ensuring individuals can pursue their legal rights and seek redress for grievances. However, when courts operate as monopolies, it can have implications for access to justice. Monopolies have exclusive control or dominance over a particular market or industry. Courts are monopolies because they […]
Post date: Fri, Sep 4, 2020 |
Category: Economic Growth |
By: Leo Kipkogei Kemboi, |
Covid-19 shock on the economy is one of its kinds. It combines both supply and demand shocks. Previously, economic shocks have always been mostly in the supply side and specific sectors that eventually spiral to the rest of the economy. The most recent economic collapse, the Global Financial crisis of 2007–2008 was triggered by severe contraction of liquidity in global financial markets that originated in the United States as a result of the collapse of its housing market, and this threatened to destroy the international monetary system .
The supply shock reduces the economy’s capacity to produce goods and services at given prices. On the other hand, a demand shock reduces consumers’ ability or willingness to purchase products and services at given prices . The COVID19 shocks have affected Kenya’s economy in several ways. They include contraction of the economy, productivity losses, and welfare losses.
Contraction of the Economy
Analysis of Kenya’s economic rates shows that years 1992, 1993,1997,2000,2002,2008 and 2020 have population growth growing above economic growth rates. Most of the shock years are election and drought years. The preliminary data so far indicates that Kenya’s economy will contract in 2020 by -0.3%. However, the contraction could be as high as five per cent. The contraction rivals the contraction of 1992. Over the 30 years, the years 1992, 2008, and 2020 will be the most difficult in recent Kenya’s history. Both 1992 and 2008, Kenya witnessed election skirmishes. The post-election violence in 2007/2008 was of greater magnitude. A severe fall in economic growth rates will affect incomes significantly.
Social Welfare Losses
In its reports, the IMF mentions that almost all households surveyed in Kenya said that their income decreased, and about half said that they are “cooking less frequently” and “altered their diet .” The KNBS in a comprehensive national survey found out that almost 22 per cent of households reported without having food stock. The 22 per cent of households translates to nearly 2.67 million households or an estimate of 10.7 million Kenyans.
Productivity Losses
Various sectors have reported a loss in the number of hours worked. From the chart below, the service sector has lost more hours compared to manufacturing. The COVID19 can explain the loss of hours in the service sector especially in the hospitality industry.
The number of hours lost translates to productivity losses. The education sector has suffered a more significant number of hours because of the complete shutdown of schooling in Kenya. Employees in the education sector, utilities, hospitality, and construction have lost more hours because of physical distancing requirements in the Industry. Kenya’s service sector firms are more productive than manufacturing firms.
The loss in hours worked can be seen in the decline in electricity consumption. A month to month comparison between 2019 and 2020 shows significant reductions in Kenya Power and Lightening Company electricity sales in April, May, and June. KPLC electricity sales declined by 14% in April, 11% in May and 1% in June compared to the same months last year.
The principal managers of the Kenya economy should take a more targeted approach with its new pandemic aid. Already, they had been proposals fronted by the Economist David Ndii that included the proposal for a lifeline fund, expanding community safety nets amongst others. These kinds of spending could involve stretching the budget deficits. Other Economists believe that Central Banks may find it appropriate to shrink the size of their balance sheets .
The observations highlighted here are not conclusive as more effects will be clearer as the year comes to a close. However, policymakers should continue to keep an eye on the evolution of the Pandemic and its effects. They should take a more targeted approach. Policymakers should devise specific social welfare infrastructure that can target the population already rendered vulnerable by the Pandemic. Proposals such as the ones advanced by renowned Kenya Economist David Ndii are critical to reviving the economy and social safety nets to cushion against welfare losses. The topmost priority now is to deal with the public health crisis; which is suppressing the infections.
Endnotes
Case Adjournments is one of the key issues that contributes to case backlogs because it reduces the efficiency of courts. An adjournment in a legal setting involves pausing or temporally stopping ongoing proceedings to be continued at a later time, date, or location. It may also indicate the end of the day’s proceedings. Parties involved […]
Introduction In February 2023, the Kenyan government announced its intention to establish a framework that will enable Savings and Credit Cooperative Societies (SACCOs) to extend loans to each other. This inter-Sacco lending framework shall be set up by the Sacco Societies Regulatory Authority (SASRA) and was anticipated to be in effect from August 2023. This […]
While Kenya has long implemented the NHIF (National Hospital Insurance Fund) whose core mandate is to provide medical insurance coverage to all its members and their declared dependants and also to make medical care affordable, enrolment rates, particularly in the voluntary and informal sectors, remain low. Yet, NHIF is the most common type of health […]
Introduction According to the United Nations, Double Taxation Agreements (DTAs) are “bilateral agreements between two countries which allocate taxing rights over income between those two countries thereby preventing double taxation of income. The main objective of DTAs therefore, is to prevent and or eliminate avoidance and evasion of taxes on income and capital by both […]
Courts as Monopolies Access to justice is fundamental in any democratic society, ensuring individuals can pursue their legal rights and seek redress for grievances. However, when courts operate as monopolies, it can have implications for access to justice. Monopolies have exclusive control or dominance over a particular market or industry. Courts are monopolies because they […]