DETRIMENTAL – Sectoral GDP loss due to Covid-19 pandemic
The Ministry of Finance and Economic Planning has said the local economy is projected to lose approximately K56 billion in real GDP which translates to approximately K244 billion in nominal GDP if the coronavirus pandemic is contained by the second quarter of the 2020/2021 financial year.
In the National Economic Report released Monday, the ministry says accommodation and food services, transport and storage services, and agriculture, forestry and fishing would be the worst hit sectors.
“Accommodation and food services as the worst affected sector, lost almost 13.4 percent of its GDP as a result of the coronavirus. This is followed by Transportation and Storage services sector which lost about 7.4 percent of its real GDP. Similarly, the Agriculture sector lost 4.1 percent of its GDP.
“The moderately affected sectors include Wholesale and Retail trade, Manufacturing and Financial and Insurance services. The least affected sectors include Information and Communication, Others Services (arts and entertainment services) and Public Administration and Defense Services,” reads the report in part.
The ministry says going into 2021, the picture of the sectoral losses is pretty much the same as that of 2020 as Accommodation and Food services, Transportation and Storage services and Agriculture activities continue to be the most affected sectors.
It says while some sectors register further GDP loss in 2021, Wholesale and Retail trade sector shows fast recovery following the containment of the Coronavirus.
“Generally, the recovery of the economy in the short to medium term will depend on policies that will be implemented now. For example, availability of foreign exchange as well as access to finance will enable many sectors recover quickly from the effects of the coronavirus pandemic,” the report says.
Presenting the 2020/21 national budget in Parliament on Friday, Finance Minister Joseph Mwanamvekha said two scenarios have been developed, the first of which assumes that business will normalise by September, 2020 with GDP growth estimated at 1.9 percent while the second one, is a worst case scenario, where business and economic activities may not return to normality until December, 2020, resulting into a GDP growth rate of -3.8 percent.
Mwanamvekha said due to the strong sectoral interlinkages, the coronavirus has affected all sectors of the economy especially; the manufacturing, transport, tourism and accommodation, wholesale and retail trade, and financial services.
“In particular, spillovers from the global recession and border closures in neighbouring countries have reduced exports and imports of raw materials; raised transit costs; reduced remittances and tourism receipts as well as foreign direct investment,” Mwanamvekha said.
He added that real GDP growth projection for 2021 has also been revised downwards to 4.5 percent from an anticipated growth of 5.8 percent.
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