Experts warn coronavirus to increase cost of living
Kenyans are staring at soaring food and commodity prices in the coming weeks as the novel coronavirus pushes the nation towards an economic lockdown to limit its spread.
It comes amid shrinking household wages as the Covid-19 pandemic keep people from stores, restaurants, schools, movie theatres and workplaces.
Already, tough government protocols on businesses to reinvent themselves in what comes with additional costs on consumers.
Matatus and other Public Service Vehicles (PSVs) have been forced to ferry passengers at suboptimal capacity, thus forcing them to hike fares to compensate for vacant seats.
Restaurants were not ordered closed but allowed to only retain their delivery services, and many are not contemplating increasing prices to sustain their delivery segment.
Meanwhile, non-food businesses are recording little to zero customer traffic as consumers hoard cash in case there will be a total lockdown.
Now, economists warn that lost cash flow and the impending inflation will cripple the populace financially since majority of Kenyans live from hand to mouth.
Investment analyst Aly-Khan Satchu warned of imminent anarchy unless urgent remedial measures are put in place to help Kenyans wade through the pandemic.
In the short-term, he said Chinese factories running to pump essential goods down the supply pipeline, although that seems far-fetched.
“Given that I don’t believe China can crank up the machine and they are our main supplier. I expect an inflation push which I am already seeing,” he told Business Hub.
“This is an extraordinary once-in-a-century situation. The virus is not correlated to endogenous market dynamics but is an exogenous uncertainty that remains unresolved and therefore, it is a “Black Swan”...I am worried we are weeks away from a zombie apocalypse,” he added.
The Cytonn 2020 Markets Outlook, projects inflationary pressure emanating from the effects of the world Pandemic-Coronavirus, driven by supply-side shortages owing to lockdowns across the globe which have disrupted supply chains, further heightening cost-push inflation.
And Satchu says Kenya is facing a supply and demand shock that could lead to quarantine sudden stop.
Spending power
“Simultaneously, demand is cratering whether it is our flowers, our tourism, and spending power because once we quarantine and that is the only way to stay safe, we will collapse,” he says.
“The government has only one option now and that is the IMF. The Government cannot vaccinate the economy with rate cuts and is better off targeting money directly via the mobile phone to its citizens.”
Globally, thousands have lost their jobs and livelihoods with flower workers and hotel staff bearing the brunt of employment loss in Kenya.
The International Labour Organisation warned that up to 25 million jobs could be lost globally if governments don’t act fast, outpacing the 22 million jobs lost during the 2008-09 financial crisis.
Global economic bodies like the OECD and the International Monetary Fund are slashing their macroeconomic growth forecasts in response to the Covid-19 pandemic.
According to the Cytonn outlook, coronavirus will have a 10 to 25 per cent impact on local gross domestic product (GDP) growth for the year 2020.
“The 10 per cent impact is an optimistic case in the event the outbreak is contained, and a 25 per cent impact in the event it is not contained,” the report reads in part.
