Kenya business confidence edges up in January

Monday February 1 2016

A lady displays some of her products during an exhibition at the KICC in Nairobi. Under the new law, businesses with an annual turnover of below Sh500,000 and employing less than 10 people will be registered as “micro enterprises”. Photo/Fredrick Onyango

A lady displays some of her products during an exhibition at the KICC in Nairobi. Photo/Fredrick Onyango 

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Business confidence among Kenyan firms increased marginally in January this year compared to December last year, a new poll by Standard Chartered shows.

The poll shows that business sentiment as measured by the lender’s Business Sentiment Indicator (BSI), rose 1.3 per cent month on month in January to 63.9, up 9.2 per cent from a year earlier.

Firms polled reported that credit was more freely available, with interest rates paid having fallen in January, they also anticipate a looser monetary policy in the coming months coupled with recent exchange rate stability.

Ease policy

“Businesses appear to share the view that the Central Bank of Kenya will eventually ease policy. Firms reported that the near-term outlook for interest rates was more positive for their businesses," notes the poll. The study shows that Kenyan businesses expect inflation to ease in the coming months.

Despite the rise however, the study’s findings show sentiment was mixed.

While two of the five components of the headline indicator – new orders and order backlogs – which together account for 50 per cent of the headline indicator, increased in January, seven of 15 current conditions indicators fell month on month, says the poll’s findings.

Indicators which fell include inventories which went down by 47.3 per cent.

"However, despite these improvements, corporates’ assessments of their financial positions were little changed, perhaps due to a likely seasonal drop in production post-Christmas,” it says.

The poll also shows Kenyan firms appear cautiously optimistic about near-term prospects.

“The drop in some indicators in January may be due to seasonal effects. Alternatively, they may signal deeper caution over what lies ahead. Also fresh in the minds of some private-sector operators is the tightening of financial-sector liquidity, seen episodically last year, as the CBK liquidated one Kenyan financial institution and took another into receivership,” says the poll.