The Impact of Covid-19 on Kenya’s Economy

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Since the outbreak of the coronavirus in Wuhan, China, there have been devastating effects on the global economy. The first case of the Covid-19 was reported in Kenya on March 13, 2020. As of 25th October 2020, there are 48,790 cases of Covid-19, 33,876 recoveries, and 896 deaths in Kenya. Similar to other countries, Kenya is experiencing economic shocks related to the pandemic including high unemployment levels (job losses), declining GDP, depreciation of the shilling against major currencies, low volumes in the NSE, among other economic effects. Key sectors of the economy including tourism and hospitality, transport, aviation, education have been the hardest hit during the pandemic. Overall, the Covid-19 pandemic has negatively impacted the Kenyan economy as seen in the disruption of global supply chains, the volatility of the shilling among foreign currencies, declined performance in the securities market, increase in non-performing loans, a decline in diaspora remittances among others. As a result, the Kenyan government through the Central Bank of Kenya has come up with economic stimulus programs and change in fiscal and monetary policies to ensure that the economy remains competitive in international trade.

Performance of Securities Market

Since the report of the first case in Kenya, the majority of foreign investors have withdrawn their investments from the NSE with fear of market collapse, leading to a plunge in the NSE 20 Index. The NSE 20 began the year with a high note of 2,600 points closing at 1,800 points on 23rd October, 2020. This translates to approximately 30.8% loss during the year. The securities market trend mirrors the performance of the Kenyan economy as it indicates an increase in foreign direct investments, investor confidence, growth of the GDP, and strengthening of the shilling against other currencies.

Besides the NSE-10 Index, blue-chip companies listed on the exchange have also experienced a decline in stock prices. As illustrated in the table below top listed firms including KCB Group, Bamburi Cement, East African Breweries, British American Tobacco, Diamond Trust Bank, Cooperative Bank, and CFC Stanbic Holdings has lost their market capitalization value due to economic shocks of the Covid-19. Most companies have had a bearish trend with the majority of foreign investors withdrawing their stock portfolios in the NSE.

Source: Nairobi Securities Exchange, 2020

Exhibit: Sample of Blue-Chip Companies Listed on the Nairobi Securities Exchange

SAMPLE OF BLUE-CHIP COMPANIES Start Date End Date Percentage Change
  Jan-20 23-10-2020 Change
KCB 54.25 37.05 -31.71%
Bamburi Cement Limited 80 23.75 -70.31%
East African Breweries 197.5 157 -20.51%
British American Tobacco 478 349.25 -26.94%
Diamond Trust Bank 111 61 -45.05%
Cooperative Bank of Kenya 16.35 11.4 -30.28%
CFC Stanbic Holdings 103.75 81.25 -21.69%

Source: Nairobi Securities Exchange as of 23rd October 2020

The volatility of the Kenya Shillings against the Dollar

The Covid-19 pandemic has had significant pressure on Kenya shilling among leading global currencies including the dollar, euro, and the sterling pound. Kenya shilling has depreciated against the dollar due to low turnover in tourism and international trade which are some of the economy’s leading earners. Though the government lifted the international travel ban on 1st August, there is a slow recovery in major sectors of the economy resulting in the dollar depreciating further against major currencies. However, the CBK is making strides to stabilize the shilling during the pandemic.

Disruptions in the Global Supply Chains

The transmission of the novel virus has severely disrupted the global supply chains, especially in international trade making Kenya vulnerable to a drop in exports. Kenyan exports have been on a decline since March 2013 reaching lows of $43.213 billion in April 2020.

The current curfew and partial lockdowns measure in the economy have highly affected the manufacturing and production sectors that rely on the importation of raw materials. Companies have also been forced to lay-off workers due to decreased consumption in non-essential sectors of the economy.

Impact of the Covid-19 on the Kenyan GDP

Due to the pandemic, the Kenyan GDP which was on a trajectory trend has lost points in 2020 closing at approximately 82 points compared to 90 points in 2019. The GDP decrease is mainly attributed to the depreciation of the Kenya shilling, decreased foreign direct investments, an increase in government deficits by Kshs 17.2 billion, a high unemployment rate, and decreased tax revenues. Subject to these economic shocks, the World Bank has predicted a drop in the GDP from 5.6% to 4.8% by the close of 2020.

Economic Recovery Measures

As a result of the coronavirus crisis, the government through the CBK has adopted fiscal and monetary measures including the following;

  1. Economic stimulus programs have been aimed at encouraging bank lending to small and medium enterprises at lower interest rates.
  2. Commercial banks have been encouraged to restructure loans in efforts to lower default risk for SMEs and individuals who control most of the loan portfolio.
  3. The National Treasury and the Kenya Revenue Authority introduction tax cut measures through a drop in VAT from 14% to 16%, reduction of resident corporate tax 30% to 25%, decrease in PAYE from 30% to 25%, and 100% tax relief for low-income earners with a gross monthly income of Kshs 24,000.
  4. Credit holidays with guidance to commercial banks to postpone principal and interest payments for businesses.
  5. Recommendations to commercial banks from the Central Banks on restraining increasing interest rates on restructured debt.
  6. Extending the maturity of the central bank’s refinancing loans for commercial banks.
  7. Issuance of treasury bills and bonds to raise money for the financing of government and county projects during the pandemic.


Although the Covid-19 pandemic has greatly affected the Kenyan economy, there are positive expectations of better to come in 2021. The world is moving closer to the discovery of a vaccine which will bring normality to key sectors of the economy. The government should continue the promotion of Kenya products to facilitate economic growth in the long run. Besides, there is a need to encourage foreign direct investment which is a major contributor to economic growth through investment in bonds and stocks. The Monetary Policy Committee should continue stabilizing the Kshs against major currencies to avoid the devaluation that may be detrimental to the tourism and aviation industry and lack of competitive advantage in international trade. Despite the crisis, Kenya has been uploaded by the international community on economic recovery measures that will maintain its global competitive advantage in the international financial markets.


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The Author of this Article is a registered Financial & Investment Analyst with Institute of Certified Investment and Financial Analyst. If your require more information Email: or +254 780216631

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