Understanding the Economic Impact of COVID-19 in Kenya

Abstract

The COVID-19 pandemic has caused serious disruptions in Kenya, and growth in the country’s output slowed substantially between 2019 and 2020. We use an economy-wide analysis to assess the distribution of the pandemic’s economic consequences to inform the design of effective mitigation and recovery policies. Our results indicate that the service sector has paid a heavy price during the COVID-19 pandemic as compared to the industrial and agriculture sectors. Employment declined for all labor categories but semi-skilled workers (those with only a primary education) were particularly affected because of their heavy reliance on declining service industries. Under COVID-19 shocks, women’s employment declined less than did men’s employment because a relatively higher share of women’s employment occurs in the agricultural and food industries. Nearly all household categories witnessed income loss, but high-income deciles were more negatively affected because of their heavy reliance on earnings from semi-skilled employment. Both external and domestic channels appear to have contributed heavily to the negative impact of the COVID-19 pandemic on the Kenyan economy, and many of the areas identified by this study are covered under the Kenyan Economic Recovery Strategy with the exception of the disruptive effects of the global supply chain of machinery and equipment.