Optimism regarding Kenya’s economic growth prospects over the next 12 months has improved, driven by a stable macroeconomic environment, characterized by lower inflation and a stable shilling along with favorable weather conditions, company-specific growth strategies, and sector-specific opportunities, according to the September 2024 CEOs Survey conducted by the Central Bank of Kenya.
The survey indicates sustained optimism for both company and sector growth over the coming year. Companies are employing targeted strategies to stimulate growth, while sectoral growth is influenced by specific strategies, emerging opportunities, and seasonal factors. Respondents expressed optimism about global growth, attributing it to declining global inflation, interest rate cuts in major economies, and the anticipated conclusion of elections in developed countries. However, increasing geopolitical tensions remain a potential threat.
The survey also revealed a decline in business activity in Q3 2024 compared to Q2, primarily due to disruptions from political disturbances. However, Q4 2024 is expected to see improvement, aided by seasonal factors and recovery from prior political distractions.
Key domestic challenges hindering growth in the next 12 months include the high cost of doing business, reduced consumer demand, and political interruptions. Companies plan to mitigate these challenges through strategies such as cost and risk management, operational diversification, and stakeholder lobbying.
The survey assessed CEOs’ optimism regarding the growth prospects for their companies, sectors, and both the Kenyan and global economies over the next year. It shows improved optimism for the Kenyan economy, supported by a stable macroeconomic environment, good weather conditions, and specific growth strategies.
Despite this optimism, challenges such as high production costs, political disturbances, and liquidity constraints from high borrowing costs and low consumer demand pose significant risks. Companies are focusing on strategies to stimulate growth, including cost containment, new product development, and revenue diversification, although they face challenges related to financing and subdued demand.
Sector-specific growth prospects are driven by tailored strategies and seasonal factors. The tourism sector is expected to continue its recovery, with growth largely dependent on seasonal activities peaking until February 2025. However, industry players cite elevated levies and taxes as significant constraints. The agriculture sector is also expected to perform well due to favorable weather and increased export demand, although challenges such as limited financing and excessive regulation from government bodies persist.
In the health sector, positive growth is anticipated due to the rollout of the new Social Health Insurance Fund (SHIF). The ICT sector is benefiting from ongoing digitalization, while the education sector is seeing improved prospects due to rising demand for quality educational products and increased digitalization. However, labor unrest and student strikes could undermine these positive trends.
The transport sector is set to gain from increased travel during the festive season, while the finance sector is experiencing growth due to heightened demand for services and customer-focused innovations, despite concerns about loan defaults.
The wholesale and retail sector is facing subdued demand, prompting businesses to offer discounts to retain customers. The manufacturing sector’s performance is moderated by high operating costs, liquidity issues, and competition from imports. However, recent trade agreements in the region may enhance export opportunities.
Optimism for global growth is largely attributed to lower global inflation and interest rate cuts in major economies, although geopolitical tensions continue to pose risks. A higher percentage of respondents in the agriculture sector expect better performance in the next year, driven by favorable weather conditions boosting production and increased export demand. Nonetheless, challenges such as financing difficulties and supply chain disruptions remain significant.
Overall, growth prospects for the manufacturing sector are constrained by high operational costs, liquidity issues, and competition from imports, while the services sector is expected to see stability driven by seasonal opportunities in areas like tourism, finance, ICT, transport, wholesale trade, education, and health.
