NAIROBI, Kenya, May 6 – Kenya’s Big 4 Agenda will be sacrificed as more resources are channeled towards curtailing the spread of the coronavirus, according to a new report.
Credit rating agency Agusto & Co. Limited also expects Gross Domestic Product growth to fall below 2 percent, should the COVID-19 pandemic and attendant lockdown be sustained beyond the second quarter.
Agriculture, manufacturing, tourism, and financial services will experience high levels of disruption with ICT experiencing the least.
The report says exports of agriculture products, for instance, will be challenged, leading to mass layoffs within the sector.
“Farms may also struggle to service their loans with most farms currently running at a capacity of less than 50 percent. Nonetheless, disrupted local harvests in major European, Middle Eastern, and Asian markets is bound to drive up demand for fruit and vegetables. This will, however, be challenged by limited outbound air freights due to the Government’s restriction on travels due to COVID-19.”
In manufacturing, the firm says demand for essential and pharmaceutical goods surged as Kenyans continued to buy items both for precautionary and reactionary motives in March and April.
“Barring the immediate implementation of the Government’s economic palliatives, we expect the real impact of COVID-19 on manufacturers of essential and pharmaceutical goods to be felt from the second half of the year as household and business income and spending starts declining.”
Commenting on the banking and financial services sector, the firm expects the banking and financial services sector to witness a tepid performance in 2020 with projected fall in earnings.
This will especially be felt among the vulnerable SMEs segment given their limited capacity to service existing loans in these difficult times. Hence, we project an increase in banks’ non-performing loans though moderated by expected loan restructurings (or outright interest waivers) including the moratoria being advocated by the Government.
The report also expects the Kenyan Shilling to depreciate by around a 10 percent range to the dollar and hover between Sh103 to Sh109 for the rest of 2020.
Commenting on the finding, the company’s country manager Ikechukwu Iheagwam said the economy is in dire need of stimulus packages both domestic and international, to cushion the adverse impact of the slow growth on businesses.
“We recognize that President Kenyatta has recently signed into law economic palliatives to shield the country from large shocks and we expect the relief measures to immediately begin to address the negative impact of the COVID-19 pandemic on businesses and households,” said Ikechukwu.