COVID-19 devastates private sector, global financial and supply chains

COVID-19 has been a devastating pandemic to every country in the world but although it is a health issue, its impact has been more on the economy than anything else. A disease that affects the breathing system forced societies to alter lifestyles that reduce physical engagements as they were, to slow down the infection rates.

Kenya recorded its first case of COVID-19 in March 2020, a move that led the government to institute measures geared towards slowing the spread.

It equally happened when the new Health Cabinet Secretary Mutahi Kagwe had just taken over the office and oozed confidence among stakeholders that he has what it takes to ensure the country mitigate the impact of the pandemic.

Weighing in on the issue, the World laid it bare. “Data analysis from two parallel rapid response surveys conducted by the World Bank and partners confirms that private sector firms are facing lower demand due to reduced consumption and demand for inputs”, the bank asserted.

Today, close to 2000 people have died in Kenya, close to 100,000 infected, and over 82,000 recovered. These are however health data alone.

The Private sector takes a hit.

The Decline in the movement of goods and people has had a devastating impact on people’s lives to depend on it for their livelihoods. Even though facilities like supermarkets and local traders remained opened, they recorded fewer numbers while Kenyans also had scarce resources to boost their buying power, a result that reduced the economic activity in general.

Restaurants, bars, public service vehicles, vendors, and hotels are some of the many business establishments that were negatively affected. People were restricted from moving around the country freely, many had to resort to working from home and this meant that both buying and selling is inhibited.

The World Bank added that the negative impact of COVID-19 on the private sector has trickled down to household welfare via reduced job opportunities and lower earnings. 

Unemployment almost doubled compared to its pre-COVID level. Wage workers–and especially women–who are still employed faced a reduction in working hours and earnings.

Almost one in three household-run businesses were not operating, with revenues decreasing across all sectors.

Remittances also fell, and few households benefited from direct cash assistance.

Youth were also negatively affected by the pandemic, with revenues and profits strongly reduced for micro-enterprises run by young entrepreneurs, with only a few of them making use of government and non-governmental organizations (NGO) support programs.

Financial market and global supply chains

“COVID-19 has negatively impacted the Kenyan economy as seen in the performance of the financial markets, disruption of global supply chains, the volatility of the Kenyan currency, reduction in diaspora remittances, and reversal of prior monetary and fiscal policies”, remarked Joab O. Odhiambo in an academic paper published by Research Gate.

The paper that was published in August 2020 affirmed that the transmission of the Coronavirus has disrupted worldwide supply chains hugely making Kenya have relied on imports to be a vulnerable place. For instance, all imports from China are about 22 percent of the total imports of Kenya and with the curfew, partial lockdown measures in the majority of the manufacturing and production sectors have been disrupted massively. This had a huge impact on the economic growth of Kenya forcing the laying off of many workers in the Kenyan economy

It added that the outbreak exerted pressure on the Kenyan shilling due to the curfew and lockdown within the international supply chains leading to a scarcity of foreign currency. For example, the shortage of exports has made the Kenyan shilling vulnerable losing its value by 5 percent since the start of March. Indeed the shilling took a heavy beating, recording sh110 rate against the dollar, a new low.

It further noted that “going by the existing economic activities in Kenyan due to coronavirus, the GDP growth of Kenya is likely to range between 1.3 percent and 2.2 percent for the year ending of 2020 and this will depend on the severity of the outbreak especially at its pick, as well as how Kenyan behave to prevent more economic implications and sanctions to prevent the coronavirus spread in Kenya.

It is hoped that the lifted restrictions other than curfew will continue to support the revival of the economy.

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