Most Kenyan residents can attest that the current economic situation in the country is bleak. High inflation, an unpromising business environment, and declining personal incomes are vital indicators of the current economic paradigm.
So, what are the factors influencing Kenya’s current economic situation? Do global events and externalities directly impact the country’s economic fortunes? Let’s explore these and more questions relating to the country’s economy.
Kenya’s Current Economic Situation
Economists predict that Kenya’s economic growth will slow down this year. The country’s 2021 GDP growth rate reached 7.5% despite the subpar performance of the tourism sector. In 2022, the World Bank projects that the economy will register a GDP growth rate of 5.5% (The World Bank in Kenya, 2022).
Kenya’s economic outlook remains broadly positive moving into 2023. The country’s poverty rate is steadily falling from its 2020 highs. Most Kenyans, however, are cautiously optimistic given the unstable global economic environment.
What are the Factors Influencing Kenya’s Current Economic Environment?
Internal and external forces have a direct impact on Kenya’s economic paradigm. The country’s exposure to global fuel price fluctuations creates uncertainty in multiple sectors. High fuel prices negatively impact economic output since the prices have a knock-on effect on the agricultural, manufacturing, and transportation industries (Ngare & Derek, 2021).
Kenya’s prolonged drought in 2022 has exacerbated the country’s current economic crisis. The lack of rainfall and high fertilizer prices have increased food prices, pushing most Kenyans to the brink.
The Ukraine war has created an inflationary environment since Kenya is a net commodities exporter. For instance, imported steel prices have skyrocketed thanks to European and American sanctions on Russia’s iron ore and coal sectors.
Kenya’s challenging economic situation is also attributable to the weakness of the Kenyan Shilling relative to the US dollar. A strong dollar means it costs more to import commodities and service dollar-denominated debt (Dollar & Sheets, 2020). Costly imports have also contributed to the country’s current high inflation.
Bottom Line
Like the rest of the world, Kenya faces a challenging and uncertain economic environment. Economic forecasts indicate that the country’s economy will slow
down in 2022. Global affairs like the Ukraine war pose systemic risks to the Kenyan economy.
//TOPPIKR EXCLUSIVE//
