Although the pandemic is, by and large a health issue, it has had a lingering effect on the economy.
Nonetheless, the prospects of large-scale vaccination is seen as a forerunner to a total overhaul of containment measures currently in place.
This has injected (no pun intended) a doze of optimism in growth prospects in the year.
Coming from a tumultuous year, which was ravaged by the Covid-19 scourge, the biggest question is, how do we navigate what has become the now normal in 2021?
To aptly answer the question, it is imperative that we take stock of the macro-economic environment for the year.
Although the pandemic is, by and large a health issue, it has had a lingering effect on the economy. Nonetheless, the prospects of large-scale vaccination is seen as a forerunner to a total overhaul of containment measures currently in place.
This has injected (no pun intended) a doze of optimism in growth prospects in the year.
That said, we are alive to the fact that the knock-on impact of the pandemic may have a lag to completely dissipate.
Unemployment levels, last reported at 7.4 per cent, may ease back to pre-pandemic average of 5.3 per cent with a lag.
This will be acute in those sectors bearing the most brunt of the pandemic such as tourism.
The government further intends to dole out post Covid-19 economic recovery strategy to turbocharge growth. That further implies additional pressure on Treasury spending over the next two years. We note that this additional cash use will be partly funded by revenue arising from the tax changes at the start of the year. That said, we see execution risks in implementing the strategy.Related to this, we flag debt pressures will be a key theme in the year. Although Kenya last week announced its participating in the debt service suspension initiative, the ‘savings’ in the order of Sh32.9 billion is roughly 10 per cent of total external debt costs in the financial year.This signals that debt sustainability will remain a key issue with debt service costs as a per centage of ordinary revenue already at elevated levels.Both globally and locally, we are in an era of increased economic uncertainty, financial markets volatility and heightened trade tensions.However, amid uncertainty and risk aversion, financial investments offer attractive opportunity for investors looking at the longer term picture.Following the dip in 2020, the equities market is trading at ever attractive multiples, with an […]
