Business leaders, analysts predict economic rebound
Tuesday, January 5th, 2021
- They say anticipated arrival of a vaccine, coupled with the recovery in some key sectors of the economy, are key indicators that 2021 will have a positive outlook.
- Rebound in economy is already reflected by the improvement in PMI where we’ve seen readings as high as 59.1 in October 2020, pointing to an improvement in the Kenya private sector.
- Due to current subdued economic performance brought about by the effects of the Covid-19 pandemic, Cytonn expects the government to record a shortfall in revenue collection with the target having been set at Sh1.9 trillion for financial year 2020/2021.
- The United Kingdom became the first country to approve a Covid-19 vaccine tested in a large clinical trial. On December 2, UK regulators granted emergency-use authorization to a vaccine from drug firms Pfizer and BioNTech, just seven months after the start of clinical trials.
Lewis Njoka @LewisNjoka
Business leaders and analysts have expressed optimism that the economy will perform better this year compared to 2020 in spite of the onslaught by the coronavirus pandemic.
They say the anticipated arrival of a vaccine, coupled with the recovery in some key sectors of the economy, are key indicators that 2021 will have a positive outlook.
Kenya Bankers Association Chairman, Joshua Oigara, said last year’s challenges gave lenders new strength to grow their businesses, adding that the sector will help steer the country out of the turbulent period.
“We are confident in a positive outlook for the next 12 months. The economy has been in a rebound since the beginning of the last quarter of 2020, setting the stage for strong growth in 2021,” Oigara said in an interview.
“There are signs of recovery in the real economy with catalytic sectors like trade, transport, and manufacturing witnessing a significant level of vibrancy following the easing of the lockdown measures,” he added.
However, there still remain some risks in the second or even third wave of infections like those that have forced new lockdown measures in some countries in Europe, according to Oigara.
“But we remain optimistic that the development of the vaccine has covered significant ground that could make 2021 comparatively easier,” he said.
Oigara’s optimism is shared by the head of research at Genghis Capital Churchill Ogutu who said while this year’s growth may not be much, he expects it to be higher than last year’s.
“We are saying that in the event that a vaccine has been found and now we can see those sectors that had dampened demand starting to pick up, such as tourism, that will be a trigger for positive sentiments and ultimately growth,” Ogutu said.
He, however, warned that it could take a while before the economy rebounds to where it was before Covid-19 struck, noting that some of the costs of goods have been going up.
“What we’re expecting, there could be some slight rebound on the growth numbers but that is because we are coming from a bad year,” Ogutu said.
Investments management firm, Cytonn, in an analysis released yesterday said it too expects the economy to rebound.
It said considering the recent easing of some of the restrictions and reopening of some of the sectors it expects the economy to slightly rebound.
“This is already reflected by the improvement in PMI where we’ve seen readings as high as 59.1 in October 2020, pointing to an improvement in the Kenya private sector outlook,” Cytonn added in a statement.
In December, Kenya ordered 24 million doses of the Covid-19 vaccine and was to receive the initial 12 million doses late January or early February.
It is expected that with a vaccine, the country will return back to normalcy including lifting of night curfew, unrestricted travel and longer working hours translating to improved economic performance.
According to the Purchasing Managers Index (PMI) any figure above 50 indicates increased economic activity while that below 50 indicates economic decline.
In October, the International Monetary Fund projected that the economy would recover to grow at 4.7 per cent in 2021.
Cytonn, however, warned that the recent discovery of a new strain of Covid-19 coupled with the introduction of strict lockdown measures in major economies could continue dampening the economic outlook.