Kenya Slumps into a Recession for the First time in two Decades as Covid-19 Hurt Output

Kenya slid into a recession for the first time in at least two decades in the third quarter of 2020 as measures introduced by the East African state to slow the spread of the Covid-19 pandemic continued to hurt output.

Gross domestic product in East Africa’s biggest economy fell 1.1% compared with a year earlier, after shrinking a revised 5.5% in the second quarter, the Kenya National Bureau of Statistics said Thursday by email. The outcome matched median of three economists’ estimates in a Bloomberg survey.

Before the decline in the second quarter, the economy last contracted in the third quarter of 2008, when post-election violence led to a 1.6% drop in output, according to the statistics office. The agency only started publishing quarterly GDP data in 2000.

Kenya confirmed its first coronavirus infection in mid-March and later imposed a partial lockdown. Shutdowns in key markets such as the European Union and the U.K. as well as global travel restrictions hit the country’s main foreign-income earners, including tourism and exports of tea, flowers, fruit and vegetables.

Highlights:

• Agriculture, which makes up a third of GDP, grew by 6.3%, compared with a 7.3% expansion in the April-to-June period. That was helped by tea production, which increased 14% in the quarter compared with a year earlier, thanks to favorable weather. Kenya is the world’s biggest exporter of the black variety.

  Education and accommodation and food services, which suffered the most during the nation’s lockdown, contracted by 42% and 58% respectively. That compares with a contraction of 56% and 83% respectively in the second quarter.

  Education’s decline was deeper and a bigger drag on growth in the second and third quarters than expected, said Yvonne Mhango, sub-Saharan Africa economist at Renaissance Capital. The brokerage expects to cut its 2020 growth estimate from 1.5% but maintain 4.2% for this year, she said.

• The World Bank sees Kenya’s economy rebounding to growth of 6.9% in 2021, from an estimated 1% contraction last year, according to the lender’s latest Global Economic Prospects report. The nation’s Treasury estimates GDP managed to increase in 2020, by 0.6%, and said expansion could pick up to 6.4% this year, before slowing to about 5.5% in 2022 due to the uncertainty wrought by elections schedule

Bloomberg

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