The economic truths State will not admit amid inflation storm

Traders display their fresh produce at Kisii roundabout on April 14, 2024. [Sammy Omingo, Standard]

It’s easy to predict what President William Ruto will say in the next state of the nation address.

We are already hearing a bit of it in the narrative that the economy is turning around with a fall in inflation.

Last week, I tried to explain why inflation is falling. I am an optimist, but I love basing my optimism on reality.

Our economy has not grown as fast as expected. When will we reach the 10 per cent envisaged in the Vision 2030 economic blueprint?

Is the Bottom-up Economic Transformation Agenda (Beta) an enhancement of Vision 2030 or a replacement?

Firms have slowed hiring, meaning fewer citizens with money to spend. Some are downsizing, a diplomatic term for sacking workers or reducing the workforce. 

Technology is making downsizing easier. Covid-19 despite its negative effects, allowed firms to adjust to new economic realities, such as working from home.

We also inadvertently realised there were jobs we did not need. Covid-19 taught us to be more productive and do more with less. 

It is curious government entities, including county governments, are hiring going by the adverts in the dailies. 

The government and private sector have different economic philosophies. Celebrating a fall in inflation is like keeping cars at home and claiming accidents have reduced.

The fall in inflation is paid for by fewer jobs. Is that why we want to export jobs? Has anyone noted the proliferation of study abroad and betting adverts on TV, the radio and everywhere else?

In unveiling the economic truth, we should look at the trees, not the forest. The economy at large may grow.

What of individuals like you and me? Most ordinary Kenyans never bother with economic statistics or its jargon.

Economics is not easy to understand like music or movies. The best way to know if the economy is growing is to ask ordinary Kenyans if they feel the growth with money in their pockets or prospects of a better tomorrow.

Economies can grow with the vast majority not feeling it, either because of inequality or a big shadow or black economy.

Most economic activities aren’t captured by the official data. Think of “wash wash” (money laundering) or selling drugs. 

When I talk to ordinary Kenyans, they say growth is not being felt. Most are struggling.  They say it is rare to get work as casuals at construction sites, in homes or as suppliers.

Getting a formal job is not easy. Have you noted how irritable we have become?

Why are we surprised? We have been battered by terrorism, Covid-19, Gen Z demonstrations and political drama, including the recent impeachment of immediate former Deputy President Rigathi Gachagua.

That has made us wary of spending money, further slowing down the economy. 

According to the Africa Development Bank, “Kenya’s GDP is projected to grow 5.4 per cent in 2024 and 5.6 per cent in 2025, driven by services and household consumption.” 

If we withhold consumption, the economy slows. Economic reality and truths are very hard to hide.

Think of your economic status in the last year.  Have your savings gone up? What about your debt and if you have bought anything lately?

What have you postponed buying? Do you visit the supermarket less often? Have you also noted the slow speed at which WhatsApp harambees raise money?  Do you have any economic fears about tomorrow?

We could come up with narratives, but the market and its sentiment carry the day. There has also been a proliferation of digital taxis in every state. Could this explain the many small cars slowing traffic on the highways?

Rising crime rates are another indicator the economy is not performing as expected. 

What great economic news rivals impeachment? Christmas is next month. Are you looking forward to spending?

Another good test of economic status is parties. Are there more birthday parties, baby showers, and anniversaries?

We want to drown our economic sorrows, not celebrate. A majority of these parties are fundraisers. Others suggest such parties indicate inequality, some have enough to indulge in luxuries.

There are also more gyms to burn off fat when others are starving. When will our capitalism get a human face?

We have heard that things will get worse before they get better. What are the time frames? 

Away from home, are we prepared for Trump’s second term and his new economic policies that have upset US allies?

We formed a committee to leverage former President Obama’s presidency. We may need one to navigate Trumponomics. Will he impose tariffs on Kenyan goods? Is the Africa Growth and Opportunity Act (Agoa) safe? 

Would a slowdown in the European Union and China because of US tariffs affect us? Will deporting immigrants slow down remittances from the US and affect the exchange rate?  Will drilling for more oil in the US reduce prices despite climate change? 

Shall we ever export our oil if the price goes down? I am by no means a fossil fuel advocate; I am an economics realist.

What will happen to Saudi Arabia, Nigeria, Venezuela, Russia and other oil-dependent economies if we do away with oil?

The global economy is interconnected. We should simulate the effect of Trump on the global economy and our own. 

Will Trump join other disruptions, such as Covid-19 on our economy? Should we get an economic stimulus package to mitigate Trumponomics and our prevailing economic circumstances?