- The government ought to formulate a mitigation plan that would include, perhaps, a rescue package for firms in distress.
- As dark economic clouds gather, the government would do well to gather experts for consultations and dialogue on response options.
The World Bank Group released its “Global Economic Prospect” report for 2020, in which it paints a more positive assessment of Kenya’s economy.
It forecasts the country’s real gross domestic product growth rate to reach six per cent, from 5.8 per cent, which would rank us among top-performers in Africa.
The sub-Saharan region is expected to have an average growth of 2.9 per cent. But Kenya’s performance would still be slower than that of Uganda, Rwanda and Ethiopia.
The World Bank, however, warns that global and individual economies could be adversely affected by the re-escalation of trade and geopolitical tensions, extreme weather, sharper-than-expected growth slowdown in major economies and resurgence of financial distress in large emerging markets.
The report also acknowledges a slowdown in growth productivity. It calls upon governments to invest in physical, intangible and human capital, reallocate resources towards more productive sectors, boost firm capabilities to accelerate technology adoption and innovation and promote growth-friendly macroeconomic and institutional environment.
While these are sound recommendations, there may be little scope for the government to pursue most of them.
That aside, it would be useful to understand the set of assumptions that informed the model that yielded such favourable assessment for us, given the economic gloom that seems to engulf the country.
We’re already under the onslaught of destructive locusts — a reminder that we are vulnerable to a myriad growth-impeding conditions.
Nairobi and Mombasa, the core urban economies, are facing considerable difficulties. There are unabated job losses, business closures and bankruptcies.
It appears the abrupt collapse of Nakumatt was just the tip of the iceberg; we should be prepared for mass layoffs due to high cost of doing business, suppressed demand, bankruptcies and the accelerated exit of multinationals.
This could be compounded by the collapse of several mismanaged public enterprises in the coming years.
The government ought to have acknowledged these challenges and formulated a mitigation plan that would include, perhaps, a rescue package for firms in distress.