Real estate sector to deny economy Sh1tr on back of pandemic
Disruptions in Kenya’s construction and real estate sector will bite a huge chunk off the Sh1.2 trillion the sector pumps into the economy annually, consulting firm Deloitte has said.
This is part of shocks that will see Kenya’s national wealth or gross domestic product (GDP) shrink from 5.7 per cent growth to one per cent in 2020.
Deloitte’s projections are also pegged on disruptions in tourism, manufacturing and agriculture sectors owing to the economic disruptions of Covid-19.
Working hours
The study, dubbed Economic impact of the Covid-19 pandemic on East African economies, says the dip is fuelled by shorter working hours, decline in construction materials due to supply disruptions and lower demand for housing.
Analysts say the depressed economy will create a $658 million (Sh69 billion) shortfall in revenue collection in the remaining three months to the 2020/21 fiscal year, leading to massive decline in government spending.
“Currently, exporters are shipping out between 25 and 30 per cent of their normal capacity, while flower exporters have recorded 50 per cent drop in exports with indications productions is currently less than 10 per cent and facing the risk of total collapse,” said Deloitte.
A similar situation will be replayed within the hospitality sector, which earned the country Sh163.6 billion and contributed 8.8 per cent of the GDP, employing more than 1.1 million people.
Reduced tourist arrivals and consumption of various goods and services is expected to impact the incomes of workers in related sectors.
Farmers are this year facing reduced earnings. Not only will food production be affected by the locust invasion, the pandemic will shrink market share for their produce, especially horticulture and coffee in Europe and North America due to Covid-19. Last year, the sector contributed 32.4 per cent to the GDP.
According to Deloitte, the manufacturing sector is expected to shrink by 30 per cent owing to disruption in supply chain for key inputs in machinery and chemicals.
