All industries and indeed countries experience cycles of economic growth based on many factors. These factors include the health of the market, what consumers need, environmental factors and also political factors affecting both local and global economies. Some companies may perform better than others even in times of turbulence and it all depends on their products and how they are well prepared to face each of the challenges they will face. It is also about visualizing way ahead of any challenge that will most likely occur.
When we look at the economy growth in Kenya as per the Barclays Bank Macro Economic Report we wrote about earlier, a global growth of 3.9% was achieved in 2017. This indicates the country in has been resilient and this resilience has been on since 2011. Also as early stated, drought and the long election period affected us alright but did not deter or adversely drop the economy of the country. However, there were, and still are some existing challenges to our economy which cannot be ignored.
Debt relief and Infrastructure Development
Kenya’s debt burden has increased sharply over the past five years. This has been due to the need to develop infrastructure all across the country to enhance progress. Today, every Kenyan born is already facing debt. This can drag the economy of the country behind and the time frame and costs of feeding this debt are immense. It also becomes a problem when projects being developed are not economically viable and will not be able to pay the debt, at least immediately or soon after.
For countries which commit to poverty reduction through policy changes, and demonstrate a good track record over time, debt relief and economic leaps are almost guaranteed.
Commodity tailwind
A tailwind describes some condition or situation that will help move growth higher and hence improve the economy. For instance, when gas prices fall, commodities traded make more profit for manufacturers and traders. Kenya is an agriculture zone and most of the goods such as tea and coffee among other cash crops are exported. Farmers will receive profits when the oil prices reduce or when insecticides and seeds are subsidized. The cost of value addition will also come down. This will enhance growth from the lower economy and will thus affect the larger Kenyan economy.
Climate Change
Climate change is basically the earth’s response to a rise in Carbon Dioxide in the atmosphere. With a rise in global temperatures, several macro and micro economies are being affected by this, with farming being among the most hard hit areas. When the country faced drought in 2017, people and even animals faced low productivity and even death. Humans are a resource for a country. People cannot work or even go to school when they are struggling with how to feed themselves and even their livestock. The economy therefore suffers due to loss of productivity.
Climate change is likely to increase the number of people who are forced to leave their homes because of drought, flooding, or other climate-related disasters. Mass movements of people and social disruption may lead to civil unrest, and might even spur military intervention and other unintended consequences. When a country is under such circumstances, the economy definitely suffers.
Climate change will eventually cost countries and economies a good chunk in growth. Industries could be forced to find other alternatives of power and water because of temperature changes and drying of rivers and lakes. This then lead to higher prices for products and some cases services. Hence, moneys that could be used to enhance development will instead be used as incentives to cope with the rise in global temperatures.
Where is global investment money going in terms of projects in Africa? SA tops. Kenya is at No: 5 #BbkEcon2018 pic.twitter.com/yx0a96rByF
— Shiko-Msa (@Shiko_Msa) January 16, 2018
There are many more challenges that Kenya and other countries face and the Barclays Bank macro economic report is a good place to start for policy makers and Governments to counter these challenges and move their economies forward. As well as their people.
