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The Duration of Covid-19 crisis could have a detrimental impact of the country’s growth projection, according the Central Bank Governor Dr. Patrick Njoroge, casting grim growth on the EAC’s largest economy that is only beginning to feel the impact of the deadly virus and on the brink of ‘total lock-down.’
And while financial flows from the diaspora markets is expected to grow in the coming days, perhaps weeks or even months, Njoroge said in his national address that the earlier GDP growth target of 5.7 per cent looks likely to
“We have adequate reserve to cushion this but the GDP growth could be impacted as a result of the Covid-19 crisis,” he said, adding that real impact of the above-mentioned would be observed in the next 60 days.
Kenya’s GDP growth projection had been expected to rise to 5.7 per cent this year but that is now unlikely with that growth feared would now be as low as 3.4 per cent, albeit that figure is deemed to be a long shot.
The African Development Bank (AfDB) Group, in its outlook for Kenya had further indicated the economy would grow at 6 per cent this year, propelled by favorable weather conditions and big-ticket investments around the Big 4 agenda on health, housing, manufacturing and agriculture.
Kenya’s central bank on Monday cut its benchmark lending rate by a larger-than-expected 100 basis points and reduced the cash holdings requirements for banks to cushion the economy from the impact of the coronavirus.
It cut its benchmark lending rate by 100 basis points to 7.25% and lowered the cash reserve ratio for commercial banks to 4.25% from 5.25%.
The move to lower the cash ratio is expected to release an extra Sh35.2 billion for banks to lend to customers trying to deal with the outbreak, the committee said.
“As a result of the pandemic, economic growth is expected to decline significantly in 2020,” the bank’s monetary policy committee said in a statement, adding it will convene sooner than usual, in a month’s time, to assess the situation.