Forget politics, Corona still biggest threat to economy

Central Bank of Kenya Governor Patrick Njoroge during an interview on with the Standard on October 26, 2020. [David Gichuru, Standard]

Central Bank of Kenya (CBK) Governor Patrick Njoroge says Covid-19 remains the biggest risk to the country’s economy. 

Speaking to KTN in an interview yesterday, Dr Njoroge said that unlike the risks posed by the rising political temperatures occasioned regarding a possible referendum and the 2022 elections, there was still an element of surprise with the pandemic. 

He said Kenya, having gone through a lot of political risks, had somewhat learnt how to deal with them. He termed the risks - including the US elections - as “known unknown”. 

“Coronavirus is actually the one that is the unknown. The others are in the realm of known unknowns,” Njoroge said.

“We don’t know what it (coronavirus) could lead to. We don’t know how to measure the risks. It is the biggest unknown.”

After President Uhuru Kenyatta eased the Covid-19 containment measures following a dip in infection cases, the disease is rising again on what many have described as a second wave.

As a result, the president has called an emergency meeting next week to discuss the latest development. 

Njoroge ticked off some things about the country’s election process.

One, he said, is that the elected president “will be supportive of the market-based policies for the economy”, adding that the country has been able to manage the uncertainty that comes with the politics before. 

“There is much more understanding that we can have differences but still have a discourse on what is before us.”

The governor also said he was not worried about the US election, noting that its completion will lead to a decrease in the tension that has been embedded in the global financial markets. 

He suggested that completion of the US election will lead to greater policy certainty after a period in which the world’s largest economy has given cues of policy uncertainty.

Njoroge was confident that Kenya’s economy was on a recovery path having slumped in the second quarter, with the gross domestic product (GDP) contracting by a record 5.7 per cent. 

During this period, over 1.7 million people lost their jobs as the economy went through a dark period when most of the economic activities were frozen as the country implemented policies to curb the spread of the viral disease.

Njoroge noted that despite a tough time, the economy did not take a serious battering as agriculture, which constitutes a large part of the economy, posted some positive growth between April and June. 

Since then the economy, he said, has been on recovery with exports of some produce such as fruits surpassing those sold in the same period last year. 

Using the Purchaser’s Managers Index (PMI) - an index used to measure the health of the private sector - Njoroge noted that even manufacturing had thrown off the Covid-19 lag. 

He said that he was not worried about the weakening Shilling, currently trading at around 108.8 against the dollar, noting that with an organised market there is a rate that is appropriate for both buyers and suppliers. 

The governor revealed that CBK had since upgraded its Real Time Gross Settlement Systems (RGTS) in June as part of its objective of strengthening its payment system. 

“As you know, Kenyans are very digital…and so you need to support all those transactions and the RGTS is really the backbone of the significant transactions that take place,” he said.