Kenya’s private sector activity experienced a rebound in August as businesses recovered from the disruptions caused by anti-government protests in July. The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rose to 50.6 in August, up from 43.1 in July, indicating a mild expansion in business conditions.
The July PMI reading of 43.1 marked a significant decline from 47.2 in June, reflecting the impact of the protests on business activity. The protests, which were sparked by opposition to the government’s proposed tax hikes, led to disruptions in various sectors of the economy.
Impact of Protests Fades
The Stanbic Bank Kenya report attributed the rebound to the fading impact of the protests. As disruptions subsided, firms were able to resume normal operations and increase their output. This was particularly evident in the services, wholesale & retail, and construction sectors.
The PMI reading of 50.6 indicates a mild expansion in business conditions. Anything below 50.0 signals a contraction, while readings above 50.0 suggest growth.
President Ruto’s Concession
In June, President William Ruto made a significant concession by withdrawing the government’s finance bill, which contained tax hikes worth 346 billion shillings ($2.69 billion). This move helped to ease tensions and mitigate the negative impact of the protests on the economy.
Sectoral Recovery
The August PMI data showed a recovery in three of the five sectors covered by the survey. The services, wholesale & retail, and construction sectors all experienced renewed growth, while manufacturing and agriculture sectors saw declines.
This suggests that the recovery was not uniform and that certain industries may still be facing challenges.
Despite the rebound in August, the survey painted a gloomy outlook for the Kenyan economy. A majority of businesses surveyed expressed pessimism about economic prospects for the next 12 months, with only 5% anticipating growth.
Economic Headwinds
The Kenyan economy has been grappling with several headwinds, including the global economic slowdown, rising interest rates, and geopolitical tensions. These factors have contributed to a challenging environment for businesses and have dampened consumer spending.
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Christopher Legilisho, an economist at Stanbic Bank, noted that business expectations worsened in August, indicating a decline in firms’ confidence about future output. This suggests that the challenges facing the Kenyan economy, such as high inflation and rising interest rates, continue to weigh on businesses’ outlook.
If You Ask Me
While the August PMI data showed a positive sign for Kenya’s private sector, the overall economic outlook remains uncertain. The country’s ability to navigate the current economic challenges will depend on the effectiveness of government policies and the resilience of businesses.
The Kenyan government will need to implement policies to address the economic challenges facing the country and boost investor confidence. This could include measures to reduce inflation, lower interest rates, and improve the business environment.
