Optimism in Kenya attributed to asymptomatic COVID-19 cases and low infection rates
Unemployment rate remains high; at the same time, IMF growth rate predictions to be revised as the Kenyan economy begins to recover
The entertainment industry is perhaps the industry that has taken the hardest hit and it is expected to contract 40%
Consumer sentiment in Kenya saw a 7-point increase in the month of September as recorded by KASI’s CCI which rose from -16 to -9. While not at the positive levels seen before the pandemic, consumer sentiment in Kenya has seen over a 50% recovery from the -33 recorded when Kenya was hit hardest by the pandemic in April. The increase this month was led primarily by the 9-point increase in the index of current conditions which went from a value of -47 to -38. Additionally, the index of consumer expectations also rose 5 points from -3 to 2.
Optimism in Kenya attributed to asymptomatic COVID-19 cases and low infection rates
The increase in optimism in the country was also captured by various other sub-indexes. The expectation for general economic conditions in the country and city increased - both by 5 points - to a value of 1 and 4 respectively. The index measuring expectation for household income to increase over the next six months saw a 15-point increase from -2 to 13, the most significant jump observed this year. KASI’s other sub-indexes within the CCI also indicate that consumers are overall more optimistic about meeting regular expenditures and making large purchases on discretionary items.
This optimism could be attributed to the overall positivity being felt in the country in regard to the pandemic itself. Despite cases standing at 38 529 cases, most cases are those of asymptomatic patients and Kenya has an infection rate significantly lower than the rest of the world. In fact, 18% more respondents to our COVID Pulse-19 survey compared to August indicated that they feel the worst of the crisis is now over and 17% fewer people comparatively feel the worst is happening right now.
Unemployment rate remains high; at the same time, IMF growth rate predictions to be revised as the Kenyan economy begins to recover
In the wake of the pandemic, unemployment has doubled in Kenya to 10.4% compared to the 5.2% recorded in March 2020. About 1.7 million Kenyans have lost their jobs forcing them to fight for basic jobs like unclogging drains and cleaning the streets. People are fighting for anything to earn some income to put food on the table. This is why we continuously see our job prospect index record very low negative values despite incremental increases in sentiment. The struggle in the job market has led to increased borrowing. Kenyans have taken loans aggregating to Sh 245 billion through Fuliza in 2020 which is ten times more than the aggregate amount of loans taken out last year over the same period of time. People have resorted to taking advantage of overdraft availabilities to cover basic needs. In 2019, Fuliza had a consumer base of 10.7 million people but now they have 20 million registered consumers.
In June the International Monetary Fund predicted that Kenya’s GDP growth rate would contract by 0.27%. This was in contrast to the Ministry of Finance’s predictions which was a growth rate of 2.5%. As the months go along, however, there has been a significant expansion in the Kenyan economy after the reopening of the country to international trade and travel. The flower industry in Kenya is the largest exporter of blooms in Europe. Its picking up has led to an increase in export earnings seen throughout July. The tea and fruit industry has also expanded compared to last year. As a result, the IMF is looking to revise its predictions of Kenya’s growth rates this year as the country seems to be recovering a lot quicker than expected led by the expansion in agricultural exports.
The entertainment industry is perhaps the industry that has taken the hardest hit and it is expected to contract 40%
The real concern surrounds the accommodation and restaurant sector as well as tourism where the entire sector is expected to contract 40%. As we continuously report every month, the percentage of people choosing to avoid dining out, using public transportation, and go to entertainment halls like cinemas, still remains high. As a result, experts don’t see the entertainment industry recovering anytime soon. This is further emphasized by data collected in our COVID Pulse dataset which indicates that the percentage of people who have canceled travel plans remain at the pandemic level high. It's going to be a good amount of time before the entertainment industry will be seeing any recovery. Especially now, since rumors of a second wave have already begun to go around.
By Tanya Gandhi, Economic Intelligence Group at KASI.
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About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions.
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