After a severe drought in 2019, Kenya is now facing the worst desert locust outbreak in 70 years. The impact on livelihoods could be devastating, but the economy-wide cost is likely to be limited.
- After a severe drought in 2019, Kenya is now facing the worst desert locust outbreak in 70 years. The impact on livelihoods could be devastating, but the economy-wide cost is likely to be limited.
- Locust outbreaks can inflict significant economic damage by destroying crops and disrupting the income and food security of rural populations. The scale of the effect depends on a wide variety of factors (including harvest schedules and weather conditions) that are far outside our area of expertise. But the experience of other African economies which have suffered recent locust invasions may be instructive.
- In Madagascar, for example, a 2013 locust plague threatened the food security of 13 million people and resulted in a 5% drop in agricultural output. Disruptions elsewhere were less severe; the average fall in agricultural GDP caused by recent outbreaks has been about 3.5%. (See Chart 1.)
- At this time, the locusts are only present in 14 of Kenya’s 47 counties, most of them economically marginal areas of the arid north. Indeed, the affected area makes up less than 20% of Kenya’s total agricultural GDP. If output in the already affected counties falls by the 3.5% observed in previous outbreaks, this would cut 0.2%-pts off headline GDP growth. (See Chart 2.)
- Given the highly mobile nature of locust swarms, however, the infestation could spread to neighbouring counties. If counties adjacent to currently affected ones suffer a similar fall in agricultural output, the total economic cost would double to 0.4%-pts of GDP. (See Chart 2 again.) Even under this scenario however, the key agricultural crop producing areas in the southwest would be spared.
- Even in a worst-case scenario, if output fell in every county, the hit to headline growth would only be about 0.8%-pts of GDP. (See Chart 2 again.) This seems unlikely to happen, especially because geographic barriers dividing the fertile southwest from the already affected areas will probably prevent a nationwide outbreak. Given that Kenya’s economy looked set to expand by about 6.0% y/y before the outbreak intensified, it’s unlikely that the current situation will cause us to substantially adjust our growth forecast.
- The locust swarms may also have second-round effects on the economy, but the evidence from recent droughts in Kenya suggests a high degree of resilience in the face of agricultural shocks. Apart from 2011, recent droughts have had relatively little effect on food prices. Nor, with the exception of 2017, have disruptions to domestic food production led to a large jump in imports. And even if the locusts cause more damage than previous shocks, Kenya’s economy is in a better position to weather the storm. The current account deficit has narrowed in recent years, and inflation is well within the central bank’s target range.
Chart 1: Agriculture GDP
Chart 2: Impact of Locust Outbreak on Kenyan GDP Growth (%-pts, CE Estimate)
Sources: World Bank, UN FAO, Capital Economics
Sources: World Bank, UN FAO, IMF, Capital Economics
Virág Fórizs, Emerging Markets Economist, +44 20 7808 4079, email@example.com