In the ever-shifting landscape of global economics, emerging economies often find themselves navigating through a maze of challenges, both domestic and international. The International Monetary Fund (IMF), in its April 2024 World Economic Outlook report, has raised concerns about the growing impact of domestic shocks on emerging economies within the G20, notably highlighting countries like China and Kenya.

According to the IMF report, Kenya, a significant importer among G20 emerging economies, is feeling the reverberations of occurring shocks, which have contributed to a downgrade in its growth forecast from 5.5 per cent to 5.0 per cent compared to the previous year. These shocks, originating primarily from leading sources of imports such as China, Indonesia, Russia, and Saudi Arabia, are exerting pressure on Kenya’s economic trajectory.

China, a crucial trading partner for Kenya, is experiencing disruptions in its shipping industry due to escalating attacks by Houthi rebels on vessels in the Red Sea. These attacks have forced Chinese shipping companies to reroute their vessels around South Africa’s Cape of Good Hope, leading to delays in delivery times and soaring freight rates. As a result, Kenya, heavily reliant on imports from China for essential commodities like cooking oil, cereals, and petrol, is facing the brunt of these disruptions.

The IMF emphasises the potential repercussions of these disruptions on Kenya’s economy, warning of a potential negation in economic output this year, compounded by the high cost of living. With analysts predicting an increase in fuel prices due to supply chain disruptions and rising freight costs, the ease of living in import-dependent countries like Kenya could be further compromised.

Furthermore, the IMF’s outlook for sub-Saharan Africa indicates a gradual improvement in GDP growth, projected to rise from 3.4 percent in 2023 to 3.8 percent in 2024 and 4.0 percent in 2025. This forecast, however, hinges on the alleviation of negative effects from earlier weather shocks and gradual improvements in supply chains.

On a global scale, the IMF maintains a steady growth forecast, estimating global growth at 3.2 per cent in 2023, with projections remaining unchanged for 2024 and 2025. However, the IMF anticipates a decline in global headline inflation, expecting it to fall from an annual average of 6.8 percent in 2023 to 5.9 percent in 2024 and further to 4.5 percent in 2025.

Despite these forecasts, the IMF cautions that advanced economies are likely to return to their inflation targets sooner than emerging market and developing economies, signalling potential disparities in economic recovery trajectories across different regions.

The IMF’s April 2024 World Economic Outlook report serves as a stark reminder of the interconnectedness of global economies and the susceptibility of emerging economies to domestic shocks. As Kenya and other G20 emerging economies navigate through these challenges, proactive measures and international cooperation will be crucial in mitigating the adverse impacts and fostering sustainable economic growth.