Kenyans Expect for More Economic Hardship
Kenyans Expect for More Economic Hardship
Kenyans Expect for More Economic Hardship
The newly issued Kenya Economic Update paints a mixed picture of challenges and cautious optimism for Kenya’s economy. In the near future, Kenyans could expect to continue experiencing financial difficulty even though the grip of high inflation is predicted to weaken in 2024.
The World Bank Kenya released its Kenya Economic Update on Wednesday, June 5, and it presents a cautiously hopeful picture of the country’s economic progress, albeit one that is accompanied by some encouraging events.
In sharp contrast to the optimistic pre-pandemic expectations, the study depicts an economy struggling with stringent monetary policy and measures to achieve fiscal austerity. Although these steps are vital to reduce inflation, they are expected to have a negative impact on public spending and investment in the upcoming year.
Global economic growth, which already experienced a downturn in 2023, is expected to decline further in 2024.
A ray of optimism appears in the form of falling commodity prices worldwide, apart from oil. Kenyan households that are having trouble keeping up with the rising expense of living might feel some comfort from this. A significant source of relief for households is expected in 2024 as food costs continue their downward trajectory.
But the job market presents an unsettling image. According to the research, there was a troubling trend of informal employment surpassing formal job growth in 2023, and real average salaries declined. These factors contributed to an even worsening of the employment situation.
Real average earnings fell by 4.1 per cent, continuing a downward trend since 2020. While total wage employment grew by 4.1 per cent, this was primarily driven by informal employment, which grew by 4.5 per cent, outpacing the 3.3 per cent growth in private sector wage employment.
The labour market has been hit hard by increasing living costs and adverse macroeconomic conditions, impacting both real earnings and formal job creation. Informal employment added approximately 721,000 workers in 2023, compared to 68,000 in the private sector.
Kenya’s trade sector has also felt the pinch. Both imports and exports contracted in 2023, reflecting a combination of factors including lower domestic demand, a weakened currency, and subdued global trade. This trend, unfortunately, continues a decline in overall trade volume observed since the early 2010s.
Despite the gloomy near-term outlook, there are signs of potential recovery in 2024. The Kenyan shilling has strengthened against the US dollar, leading to a modest uptick in imports. Additionally, exports of key commodities like tea and horticulture have shown signs of improvement.
Kenya’s GDP growth is expected by the World Bank to average 5.2% over the medium term (2024–2026). This is a positive change from earlier projections, taking into account the recent Eurobond issuance as well as better macroeconomic conditions.
Kenya’s medium-term recovery is anticipated to be significantly fueled by the private sector. It is anticipated that favorable harvests, controlled inflation, and increased access to financing will increase private consumption.
Furthermore, it is anticipated that remittance inflows from the Kenyan diaspora will continue to be robust, supporting household incomes in a critical way.
There are still a lot of serious concerns, though. The production of agriculture and the security of food supply are seriously threatened by extreme weather events, such as the recent floods that followed years of drought.
Furthermore, to sustain macro stability and encourage job creation, the government’s capacity to carry out structural reforms and meet aggressive budgetary goals will be essential.
