Treasury raises 2021 growth forecast to 7 percent


Treasury raises 2021 growth forecast to 7 percent
File Photo of The National Treasury.

In Summary

  • The enhanced projection has been anchored on the gradual re-opening of the economy following the initial COVID-19 pandemic hit in March alongside a lower base growth in 2020.
  • Nevertheless, the strengthened outlook remains characterized by downward risks including weaker demand, erratic weather conditions and shocks from public expenditure pressures.
  • The economy has previously shown ability to immediately bounce back from shocks with 2010 GDP for instance expanding by 8.4 per cent from 3.3 and 0.2 per cent respectively in 2008 and 2009 on the backdrop of the 2008 post PEV and the global financing crisis.

The National Treasury expects 2021 growth to bounce back at a higher seven percent from its initial projection of 6.4 per cent in January.

The enhanced projection has been anchored on the gradual re-opening of the economy following the initial COVID-19 pandemic hit in March alongside a lower base growth in 2020.

“This growth outlook will be supported by a stable macroeconomic environment, turn around in trade as economies recover from Covid-19 pandemic, expected favorable weather that will support agricultural output, ongoing investments in strategic priorities of the Government under the “Big Four” Agenda, the ongoing public investments in infrastructure projects, the Economic Stimulus Program and the implementation of the Post Covid-19 Economic Recovery Strategy,” the National Treasury stated in its 2021 Budget Policy Statement (BPS).

The exchequer expects the raft of measures to push up consumer demand and increase public and private sector investments to reinforce the strong economic projection.

Growth in 2020 is still expected at a positive rate of 0.6 per cent to imply a strong recovery in the fourth quarter of the year to December after the economy slumped into recession at the end of September.

Nevertheless, the strengthened outlook remains characterized by downward risks including weaker demand, erratic weather conditions and shocks from public expenditure pressures.

“On the domestic front, risks will emanate from weaker external demand, reduced tourist arrivals and containment measures to curb further spread of Covid-19 Pandemic. In addition, the economy will continue to be exposed to risks arising from public expenditure pressures, particularly wage and security related recurrent expenditures and the erratic weather associated shocks that could have negative impact on energy generation and agricultural output leading to higher inflation that could slow down growth,” Treasury added.

The higher projection closely mirrors World Bank’s outlook which sees Kenya’s growth in 2020 at 6.9 per cent, the highest rate in Sub-Saharan Africa (SSA).

Kenya’s economy has previously shown its ability to immediately bounce back from shocks with 2010 GDP for instance expanding by 8.4 per cent from 3.3 and 0.2 per cent respectively in 2008 and 2009 on the backdrop of the 2008 post election violence (PEV) and the global financing crisis.

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