Home > Latest News > The Impact of The COVID-19 Crisis on Trade

Recent evidence from East Africa
by Andrew Mold and Anthony Mveyange

Abstract

This paper uses Kenyan trade data published up through May 2020 to provide a preliminary evaluation
of the impact of the COVID-19 crisis on regional trade in the East African Community (EAC).
Paradoxically, given the prevailing pessimism surrounding the prospects for global trade, Kenya
actually experienced a significant improvement in exports in the first quarter of the year, together with
a moderation of imports, leading to a marked decline in the trade deficit. While the initial shock to
Kenyan trade caused by the COVID-19 crisis initially looked dramatic in terms of the declines
registered, this paper reveals that

  1. the shock is not so alarming when seasonality is taken into account
  2. re-exports and imports have been the primary foci of impact
  3. and domestic exports have actually performed extraordinarily well under the circumstances, with incremental growth since 2019.

Notably, not all supply chains were disrupted by the crisis, with some Kenyan exports like tea and fruit
surpassing levels of years past. Rather, imports have been the principle victim of the crisis, declining
by a quarter over the three months since the crisis began (between March and May 2020). Capital
goods imports have declined markedly—a trend which, if sustained, could have implications for long-term economic growth. However, the fall in imports of consumer goods could also set the scene for a
revitalization of national and regional industry, as local producers step up to fill the void created by the
sharp lull in imports.

At the same time, Kenya’s EAC neighbors—especially the landlocked countries—may not be so lucky in
terms of the overall trade impact: The figures for Kenyan re-exports and intra-regional exports suggest
a concerning scale of disruption to intra-regional commerce. Considering Kenya’s leading role in intraEAC trade, these trends are worrisome.

In sum, a coordinated EAC-wide approach is critical for intra-regional trade to remain buoyant in these
challenging times and for ensuring vulnerable countries are cushioned from the COVID-19 crisis
fallout. Against this backdrop, the urgency of implementing the African Continental Free Trade
Agreement (AfCFTA) is even more palpable. Its rapid implementation, accompanied by additional trade
facilitation measures, could significantly mitigate COVID-19’s negative impact on the continent’s
economy.

20.07.08 EAC COVID Mold_Mveyange_FINAL