Kenya forecasts a strong economic recovery this year as the nation’s coronavirus vaccination program gains momentum and the services sector rebounds from a brutal pandemic fallout.
East Africa’s largest economy is forecast to expand 6.6% from an estimated growth of 0.6% in 2020, driven by increased activity in the service industry, according to the Treasury. That could be the highest growth rate in at least a decade, according to the International Monetary Fund. Growth could ease to 5.8% next year.
“Our economy will rebound to above 6% over the medium term,” Treasury Secretary Ukur Yatani said Thursday in the Kenyan capital, Nairobi. Growth will depend on “the progress of the vaccination effort, macroeconomic stability and implementation of the projects” aimed at boosting health care, housing, manufacturing and food security, he said.
The government is moving to ramp up vaccination, with doses from its order of at least 13 million Johnson & Johnson shots expected to start arriving this month, in a bid to avoid any more economy-crippling lockdowns. A boost in economic activity will help Kenya increase public revenue as it looks to ease its debt burden.
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Debt Burden
Kenya’s debt-servicing cost is projected to grow 35% in 2021-22
Source: National Treasury
*Note: Chart above shows data for fiscal years ending June 30
The reopening of hotels, restaurants and an improvement in travel due to the easing of movement restrictions will help the services industry to lift its contribution to GDP growth to a projected average 6% this year. The number of hotel workers climbed to 62% of pre-pandemic levels in July, according to a central bank survey.
Yatani said the government’s plan for fiscal consolidation is on track, and the budget deficit is expected to narrow to 5.6% of gross domestic product in 2022-23 from a target of 7.5% of GDP in the year that started July 1. That partly depends on the authorities achieving a growth target in ordinary revenue of 20.6% in the next fiscal year, while reducing expenditure as a portion of GDP.
The Treasury targets to present the 2022-23 national budget in March, earlier than it usually does in June, due to elections scheduled for August 2022. That’s to ensure lawmakers debate and approve spending plans before they head off for the balloting season.
