Kenya’s real gross domestic product (GDP) is projected to grow by 5.5 percent in 2022 and 5.2 percent on average in 2023–4 but the war in Ukraine and ongoing drought will leave a negative spin on the economy, according to the World Bank.
This growth rate, while still strong, will be a moderation following a remarkable recovery in 2021 from the worst economic effects of the pandemic, when the country’s economy grew by 7.5 percent, much higher than the estimated average growth in Sub-Saharan Africa of 4 percent.
According to the 25th edition of the World Bank Kenya Economic Update, Aiming High: Securing Education to Sustain the Recovery, the impact of the war in Ukraine is weighing on the global economic recovery from the pandemic.
Domestically, a key risk to the outlook is a further worsening of the current drought, which is having a devastating effect on food security and livelihoods in affected parts of the country and is necessitating increased social spending on food assistance.
For example, using the Integrated Food Security Phase Classification, it is estimated that 3.1 million Kenyans (out of 13.6 million) living in counties with arid and semi-arid land are food insecure.
The baseline economic projections assume that below average rains will hamper agricultural performance and accounts for the downside effects of the ongoing war in Ukraine through increased global commodity prices.
“While Kenya’s economy has been resilient, the multiple recent shocks show the urgency of improving social protection mechanisms to cushion the most vulnerable households,” said World Bank Country Director, Keith Hansen.
“This will enable Kenya to move away from other more costly and less well-targeted support measures such as fuel subsidies.”
The report further notes that Kenya’s economic performance remained strong in the early months of 2022, but external challenges have mounted.
The economy is vulnerable to the commodity price shocks resulting from the war, particularly through fuel, fertilizer, wheat and other food imports.
Global financial conditions have also tightened sharply, increasing external financing costs.
However, Kenya’s exposure to the war in Ukraine through direct trade linkages is small, with Russia and Ukraine accounting for only 2.1 percent of total goods trade between 2015 and 2020.
Similarly, tourists from Ukraine and Russia do not account for a significant share of Kenya’s tourism market.
WN/as/APA