The Monetary Policy Committee (MPC) survey conducted among Chief Executive Officers (CEOs) of 230 private Sector firms by CBK revealed that CEOs are optimistic that business activity will rapidly pick up post the August 8 General Election.
The MPC survey however listed political uncertainties among the top factors that could constrain business activity in the next 12 months coupled with concerns over reduced consumer demand and the economic environment.
On the latter, firms are particularly concerned about the stability of the Kenyan Shilling and inflation. The reduction in the number of infections experienced in the last few weeks has however resulted in COVID-19 becoming a lesser worry.
Concern over political uncertainties dropped with the percentage of CEOs worried about political activities dropping to 20 % compared to the 23 % reported three months ago.
“Firms continue to be concerned that business activity will be affected by increased political activity as investors adopt a ‘wait and see’ approach to investments. On the brighter side, most firms remain optimistic that business activity to quickly pickup shortly after the conclusion of the elections,” the poll indicated.
The poll done between March 1 and 14 2022, reported economic environment concerns at 15 per cent while reduced consumer demand and cost of doing business were listed by 11 per cent of the respondents
However, firms expect to mitigate constraining factors in the economic environment, through management of costs and risks, diversification of their businesses and digitisation of their operations. Firms in the manufacturing sector also intend to lobby with relevant stakeholders while firms in the services and agriculture sectors intend to increase sales and marketing.
Compared to Q2 2021, the CEOs are optimistic about growth prospects specifically in the agriculture and services sector in Q2 2021 driven by lower COVID-19 infections, continued government spending on infrastructure, and anticipated favourable weather conditions
“Demand/orders, production volumes, and the number of full-time employees are expected to remain at the same level for the majority of firms,” the MPC survey indicated.
The CEOs further forecasted an increase in prices of goods and services sold as supply chain bottlenecks and high input costs persist.
“ The scope for passing this on to consumers in the form of higher prices of goods and services sold will however remain limited as firms foresee those higher costs will negatively impact demand,”
Geopolitical tensions specifically the Ukraine-Russia tension also featured as a top concern for the firms. Respondents cited the Russia-Ukraine conflict which represents a substantial threat to growth, driving stronger inflationary pressures and potentially eroding the gains made from the recovery from COVID-19.
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