Private sector activity declines as drought, credit slump hit businesses

Kenya’s private sector growth moved towards stagnation in the month of February on the back of an ongoing drought and decline in private sector credit, a new business survey shows.

Data from the Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) shows growth in new orders eased to the second-weakest in the series’ history.

“As we pointed out in our previous report, the ongoing drought and decline in private sector credit access will inevitably lead to deterioration in business conditions within the Kenyan private sector. This month’s historic low reading is symptomatic of these risks that we are flagging,” said Jibran Qureishi, regional economist at Stanbic Bank.

Mr Qureishi projected potentially higher input costs over the coming months could also hinder the private sectors progress.

“More importantly, the long rains season beginning in March will be pivotal for the agricultural sector, and in the event that the rains are inadequate, we may potentially see an entrenched slowdown within the business operating environment,” he said.

Data from the survey indicated that growth of new business eased to a 17-month low.

This was despite a stronger increase in new export business in February, which reportedly occurred due to increased international demand and expansion into new export markets.

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