Agricultural sector recovery to boost Kenya’s economy: Report

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Kenya’s economy is expected to bounce back with improved performance of the agricultural sector, a new report released by Scope Markets has revealed.

According to the report, Kenya’s economy is expected to grow at almost 2% in 2020 driven by improved agricultural performance as export markets open up with the easing of Covid-19 restrictions. This improved performance is expected to impact the entire value chain positively considering the dominance of agriculture as a key sector in the Kenyan economy.

The report notes that the Covid-19 pandemic has had a negative impact on all businesses and sectors within the Kenyan economy, but with the easing of restrictions in key export markets, the agricultural sector is set for a rebound in 2021/ 2022.

The country’s major agricultural exports are tea, coffee, cut flowers, and vegetables. Kenya is also the world’s leading exporter of black tea and cut-flowers. Agriculture is key to Kenya’s economy, contributing between 27 percent to 33 percent of the Gross Domestic Product (GDP) and another 27 percent of GDP indirectly through linkages with other sectors. The sector employs more than 40 percent of the total population and more than 70 percent of Kenya’s rural dwellers.

The performance of East Africa’s biggest economy is expected to improve significantly with a 17 percent increase in tea export earnings to US$ 850 million (Ksh9.1 billion) in the first eight months of 2020. Flower exports are also recovering as European markets ease lockdowns, which is critical considering the European market accounts for 70 percent of Kenya’s cut-flower exports.

Consequently, the significant recovery of the agricultural sector is expected to catalyze accelerated economic recovery with the US$750 million (Ksh8 billion) World Bank grant putting the sector on a firm recovery path.

While the positive signs of recovery are visible, budget funding is a cause of concern for the Kenyan economy. The budget gap of East Africa’s biggest economy is seen at 840.6 billion shillings ($7.8 billion) in the current fiscal year or 7.5% of the Gross Domestic Product. Kenya, however, declined the G-20’s offer on debt relief because it would have a negative impact on existing commercial lending terms.

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