A CBK (Central Bank of Kenya) survey undertaken in July lists concerns that most Kenyan Chief Executives Officers have, including subdued demand, high operating costs, tax refund delays, financing constraints, raw-material shortages, supply-chain disruptions, and global uncertainty.
Additionally, the CBK survey found out that many CEOs are worried about the prevailing high cost of doing business, a steep climb in energy prices, rising geopolitical tensions, and the ongoing global macroeconomic volatility.
The CBK Survey found that firms in manufacturing sector expect stronger external demand and new market opportunities, anticipated stabilization of shipping and raw materials availability to support the sector performance.
However, high production and operational costs, global competition, raw materials shortages and shipment delays were identified as key constraints to the sector performance.
Wholesale and retail trade sector is expected to benefit from increased demand and orders, although cost of living pressures, supply chain disruptions, and delivery delays remain constraints.
Growth of the health sector is expected to be supported by increased uptake of the Universal Health Coverage, and the rising demand, while tight liquidity conditions delayed payments and weak purchasing power remain challenges.
Professional services are expected to be supported by seasonal demand but remain constrained by muted economic activity, reduced spending power, and delayed tax refunds.
CBK survey findings also indicate that financial services sector is expected to benefit from stable demand, operational improvements, customer retention strategies and enhanced customer experience, new product, investment banking opportunities, and fintech expansion, while competition and credit risks remain constraints.
ICT and telecommunications growth will continue to be supported by digitisation, technological advancements, and AI-related investments, although competition, particularly from established global institutions, remains a key challenge.
Respondents in the CBK Survey expect growth in tourism sector to be supported by peak-season demand, conferencing activities, improvement in services quality, and holiday travel, while elevated travel costs and limited government incentives may constrain growth.
CBK findings on CEOs perception of Middle East War
Most respondents in the July CBK Survey found that most CEOs expect global economic growth to weaken over the next 12 months, reflecting geopolitical tensions, particularly conflicts in the Middle East, higher energy prices, inflationary pressures, subdued global demand, and disruptions to trade and supply chains.
Elevated debt levels and persistent geopolitical uncertainty are also expected to constrain global growth. However, AI and technological investments, resilient demand, opportunities in emerging markets, and a faster resolution of the geopolitical conflicts could support global growth.
CBK Market Perception Survey Highlights
In the July Market Perception Survey, CBK findings show most respondents citing resilience in the services sector, particularly tourism and hospitality, rising consumer spending, recovering manufacturing activity, and improving private sector credit growth, as factors expected to support economic resilience.
However, concerns rally around risks posed by the ongoing Middle East conflict and global energy volatility, which could raise fuel, transport and production costs and disrupt trade.
Other concerns included high debt servicing costs, increased government domestic borrowing and potential crowding out of private investment, and elevated inflation and fuel prices leading to high cost of living.
Moreover, respondents highlighted high operating costs, unemployment, and continued vulnerability of tourism and hospitality sectors to external shocks as risks that could weaken household purchasing power, business competitiveness, and overall economic optimism .
CBK findings on Kenya’s Economic Growth Prospects
On Kenya’s Medium term (2027 – 2031) economic growth expectations, CBK was told by respondents that they expect economic growth to remain resilient, averaging between 5.0 and 5.9 percent, supported by recovery in the agricultural and services sectors, increased private sector activity, and continued macroeconomic stability.
Respondents expect the agricultural sector to remain a key driver of medium-term growth, supported by government interventions, and investments across agricultural value chains. Growth is also expected to benefit from continued expansion in services, manufacturing, trade, construction and tourism sectors, alongside infrastructure development.
In addition, respondents highlighted the potential for significant productivity gains from digital transformation, Artificial Intelligence (AI), automation, fintech, and broader technology adoption, alongside investments in renewable energy aimed at enhancing energy reliability and reducing production costs, as factors expected to drive medium term economic growth.
Furthermore, respondents expect macroeconomic stability, characterised by lower inflation, exchange rate stability, improved foreign exchange reserves, and prudent monetary policy to support sustainable growth in the medium term.
Respondents also anticipate that a gradual easing of geopolitical tensions could moderate global energy prices, improve trade conditions, and strengthen business confidence.
However, this medium-term outlook remains subject to significant domestic and external risks, including higher energy prices, geopolitical tensions, supply-chain disruptions, protectionist trade policies, and climate-related shocks, particularly adverse weather conditions affecting agricultural production and critical infrastructure.
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