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Lagging GDP numbers leave Treasury minister ‘flying blind’

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Lagging GDP numbers leave Treasury minister ‘flying blind’

Economy

Lagging GDP numbers leave Treasury minister ‘flying blind’


Secretary of the Treasury Cabinet, Ukur Yatani. PHOTO | SALATON NJAU | NMG

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  • The 2020 Economic Survey was expected in April, but has yet to be released.

Treasury Minister Ukur Yatani will present his $ 3.6 trillion budget for the next financial year from July this afternoon, but with the rarity of the gross domestic product (GDP) benchmark figures missing for 2020. According to scenario analysts, the country is at risk of exaggerated growth and revenue targets.

The release of the country’s 2020 GDP report, which measures total output and acts as a scorecard for the health of the economy, has been delayed. The 2020 Economic Survey was expected in April, but has yet to be released.

GDP enables policy makers and central banks to judge whether the economy is contracting or expanding and to take immediate action after evaluating the impact of variables such as monetary and fiscal policy, economic shocks, and investment plans. taxes and expenses.

Analysts have said the missing GDP data could lead to a budget overhaul if the state overstates its revenue expectations.

“The growth result for 2020 should serve as the basis for the next fiscal year. Without the data for 2020, they could be overestimating current year’s growth, “said Genghis Capital’s head of research, Churchill Ogutu.

The current budget is tied to an expected rebound this year with no real GDP growth for 2020 despite the shocks that hit the economy last year, especially in some sectors and employment rates.

The country posted a 4.9 percent expansion in the quarter through March before the country felt the brunt of the pandemic, but contracted 5.7 percent in the quarter through April, before falling to a drop. 1.1 percent in the quarter ending September 2020.

Decreased income

The third-quarter report was supposed to be delayed a quarter in December, but it wasn’t released until January of this year.

The economy continued to face shocks during the year with cycles of easing of the economy and the re-imposition by the government of restrictive measures.

This has led companies to maintain expansion and investment plans, freezing employment amid a decline in income and consumer spending. There has also been an increase in inflation that restricts household consumption along with a decrease in income.

In fiscal year 2021/22, the government has increased its fiscal revenue targets for the fiscal year by Sh181.6 billion to Sh1.78 trillion linked to the rebound in the economy.

Even so, the latest quarterly report on the workforce showed statistics up to September last year, thus a gloomy prediction for the job market.

“Since the country is a net importer, private consumption is the missing link. We still have to know the number of people employed and those who lost their jobs during the year, which is a drag on the number of people who consumed and therefore will affect GDP, ”added Mr. Ogutu.

The Quarterly Review of the Economy and Budget of the National Treasury for the third quarter ending in March 2021 showed that government spending was Sh1.09 trillion against a target of Sh1.72 trillion of which development expenditures were Sh330 .1 billion.

Tea earnings

Total exports were valued at Sh641.21 billion last year due to tea and fruit earnings, but with a trade deficit of Sh1.001 billion.

“Bottom line, in the absence of updated 2020 growth performance and ultimately fiscal 2021/22 macroeconomic projections that will be subject to revisions, this will lead to supplemental adjustments,” Genghis Capital said in its thematic note on the budget. .

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