Dep CBK Gov outlines key sectors to drive Kenya’s recovery in 2021

The Central Bank of Kenya has expressed optimism about the country's economic outlook for 2021, expecting a strong rebound supported by recovery in key sectors. Deputy Governor Sheila M'mbijjewe provided an insightful overview of the current economic performance and the factors driving the anticipated growth. As the world continues to grapple with the impacts of the COVID-19 pandemic, Kenya has navigated through with a moderate impact in the health aspect. With approximately 102,000 reported cases and around 1,800 fatalities as of December 2020, the country's experience has been relatively better compared to other regions. However, the uncertainty surrounding potential future waves of the virus remains a significant risk to the economy. In terms of GDP growth, Kenya saw a 5.5 percent increase in 2019, a sharp decline to negative 5.5 percent in the second quarter of 2020, and a further contraction to negative 1.1 percent in the third quarter. Despite these challenges, the country is projected to end the year flat and experience a significant improvement with a 7.0 percent growth expected in 2021. Agriculture, construction, and the service sector are poised to be the main drivers of this anticipated rebound. Agriculture proved to be a resilient sector in 2020, fueled by favorable weather conditions, and is expected to continue performing well in the coming year. Construction activities are also projected to pick up, alongside a gradual recovery in the service sector. Notably, inflation has remained contained, with a minor increase driven by fuel prices, while credit to the private sector has shown positive growth, particularly in consumer durables, agriculture, transport, communication, and manufacturing. However, employment rates have been impacted, seeing a rise from 5.3 percent in 2019 to 7.2 percent as of December 2020. Despite this, liquidity in the economy remains strong, with comfortable levels of foreign reserves and a stable current account. Remittances have exceeded expectations, showcasing growth even amidst the pandemic. Looking ahead, the Central Bank emphasizes the importance of rebuilding buffers to withstand potential future shocks. The banking sector is noted to be stable and resilient, yet operational and credit risks remain elevated, necessitating a strategic approach in managing these challenges. Deputy Governor M'mbijjewe acknowledges the importance of supporting key sectors like agriculture, services, and manufacturing in 2021, while also highlighting the resilience displayed by businesses amidst the pandemic. The focus for the year includes safeguarding businesses that have shown signs of resilience and ensuring their continued growth, particularly in the service and education sectors. With a strong emphasis on maintaining credit growth in crucial areas such as agriculture, transport, communications, and manufacturing, Kenya aims to capitalize on the advantages gained in 2020 as it moves forward.