Understanding The economic Shock of coronavirus in Kenya

Kenya is the richest economy in sub-Saharan Africa and a major hub for global firms and the United Nations,  The containment of an epidemiological threat such as the new coronavirus, which causes the disease COVID-19, can have disruptive effects on its economy. Corona virus in Kenya is evolving with a severe price of the snailing economy. The coronavirus effect is severe even compared to the Great Financial Crisis in 2007–08. The Nairobi Securities Exchange (NSE), was hit as soon as the first case of coronavirus was reported in Kenya.

The situation was made worse after investors panicked and made indiscriminate sale of shares.The total market capitalization sunk by Sh120 billion – in one of the largest deep in24 hours in the history of the Nairobi bourse.

As the NSE takes the blow, major focus has been placed on smaller vulnerable economies in the country too. Policymakers have been forced to create means to support vulnerable households and smaller businesses to mitigate the impact of this severe distress.

The economic disruptions caused by the virus and the increased uncertainty are being reflected in lower valuations and increased volatility in the financial markets.  While the exact effect of the coronavirus on the Kenya’s economy is unknown and unknowable, it is clear that it poses tremendous risks.

A few economic words that will define the next weeks of survival: RECESSION~ Consistent, perverse, and steady reduction of labor and economic activities in the country. GDP~Gross Domestic product, the VALUE of all services and products the country has and is producing. Economically, an addition of RECESSION and low GDP is what #CoronaVirusOutbreak sparked.

Reduced economic activities and a lingering low value of services and products ( AKA “we don’t need your services or products now” Work from home” #Curfew#stayhome) will reduce both the RICH and Poor to essentials: Food, clothing, and shelter.

NEW OPPORTUNITIES

The pandemic has also created new opportunities for business players in the pharmaceutical, e-commerce and manufacturing industries.

Those in the retail industry, especially e-commerce, began recording high sales, mostly triggered by panic buying. Mobile money transfer firms and banks are also likely to see their fortunes rise in the period through lending business.

President Uhuru Kenyatta announced financial stimulus package to address the impact of coronavirus on the Kenya’s economy to cushion it from an imminent collapse.

The head of state directed the National Treasury to offer a 100 per cent tax relief for individuals with a gross income of up to Sh24,000. The relief, subject to approval by Parliament will be effective next month.

The popular workers’ income tax, Pay as You Earn (PAYE), and resident income tax have been reduced from 30 per cent to 25 per cent. The turnover tax has been reduced from 3 to 1 per cent.

“Those “Rich” Dudes calling for total lock down have shallow idea of what they’re facing in a country that we live Hand to Mouth! You might want to believe that you have enough stock of essentials but I will refer you to definition of recession and Low GDP at the beginning. An uncalculated move will cause even the essential products and services to recede causing amalgamation of social strain unimaginable.” Said Bushebi Jr.

Kenya is a third world country with many people living hand-mouth and surviving in less than dollar a day. This means 80% of Kenyans must work to eat.

It was however a welcome stimulus for Orphans, the elderly and other vulnerable members of the society who are to receive a Sh10 billion cash-transfer by the Ministry of Labor and Social Protection to cushion them from the effects of the pandemic.

The good news that struck joyful chord with many Kenyans is the relief extension to borrowers as the president ordered for the suspension of the listing of loan defaulters at the Credit Reference Bureaus (CRB) that bars them from loans effective April 1. This will apply to persons, Micro, Small and Medium Enterprises (MSMES) or corporate entities. The tax relief encapsulate the measures topping up the already cuts announced by the Central Bank of Kenya (CBK) to cushion the economy from a collapse.

CONCLUSION

What Kenya should avoid is a potential sudden stop in economic activities, coupled with heightened uncertainty which may expose structural vulnerabilities in certain households and markets. Kenya through a decisive and rational response will minimize economic risks and contribute to a speedy recovery.