COVID-19: Kenya’s trade deficit narrows by 20% on low imports

Kenya's trade deficit has seen a significant improvement amidst the ongoing COVID-19 pandemic, with a 20 percent decrease in the first half of the year compared to the same period in 2019. This positive development is attributed to a lower import bill and higher export receipts, according to trade data from the Kenyan National Bureau of Statistics. The Chief Economist at Mentor Economics, Ken Gichinga, sheds light on the positive trend which has been a longstanding issue in the Kenyan economy. Traditionally, Kenya has been importing more than it exports, leading to various macroeconomic challenges over the years. However, the COVID-19 crisis has brought about a narrowing of the trade deficit, driven primarily by lower imports and increased exports, particularly in the tea sector. Kenyan imports have decreased by approximately 10 percent, mainly due to reduced demand for fuel products amidst restricted movement. On the other hand, exports have risen by about 18 percent, with the tea industry seeing growth in both price and volume. This shift has resulted in a notable improvement in the trade balance, although Kenya remains a net importer. The pandemic and accompanying restrictions have significantly impacted various sectors dependent on imports from countries such as China. Industries like building and construction, retail, and household equipment have faced challenges as consumers cut back on non-essential purchases. The resumption of flights is expected to alleviate some pressure on these sectors by facilitating the flow of goods and people across borders. Local manufacturers have also seized opportunities presented by the pandemic, leading to an increase in domestic production of essential items like PPE. This shift towards local production has contributed to a boost in the consumption of locally made products. Smaller traders, especially those involved in importing goods like electronics, second-hand clothing, and household items, have been hit hard by supply chain disruptions and reduced consumer spending. The uncertainty and frugality among consumers have led to a focus on essential items, affecting the sales of non-essential products. As countries worldwide begin to reopen their airspace and resume transportation services, Kenya is expected to see a positive impact on its trade and economic development. The resumption of flights and the reopening of borders will play a crucial role in reviving trade activities and supporting economic growth in the country. Overall, the outlook for Kenya's trade balance appears to be improving, with the hope that the positive trend will continue even as the nation remains a net importer.