A Survey by the Central Bank of Kenya(CBK) shows that firms posted improved business activity in the second quarter of this year compared to the first three months of the year.
According to the May 2024 CEOs Survey, improved economic activity was reported by firms in the agriculture, finance, education, Information, and Communications Technology (ICT). This Survey finding show that most firms view improved efficiency and innovation, diversification of revenue streams, development of new products and internal measures to control costs as the main internal factors that could strengthen their economic outlook.
Firms reported stable economic environment, easing cost of doing business (enabling business environment), and certainty around taxation issues as factors that could strengthen their outlook in the next 12 months.
Firms in the financial sector expect improved performance supported by the country’s economic expansion, and sector specific strategies such as introduction of new products and increased focus on the MSMEs.
Increased digitalization of the economy is expected to spur expansion of the ICT sector, while growing demand for quality education services continues to support the sector.
The agriculture sector firms report expected growth, supported by favourable weather conditions, although concerns linger around the impact of heavy rains on supply chains disruptions and output.
On the other hand, the health sector is expected to recover from the impact of the doctor’s strike experienced in Q2 2024, supported by the roll out of the government’s universal healthcare (UHC) program.
The real sector, building and construction sectors are expected to expand, largely on account of Government’s affordable housing programme.
Activity in the manufacturing sector is expected to be moderated due to the subdued demand and the increased cost of doing business.
The Survey shows moderated growth prospects for the Kenyan economy, but easing inflation, stability of the Shilling, and good weather prospects are expected to continue to support growth.
 Optimism for global growth continues to improve, supported by easing global inflation and consequent expectations of lower interest rates, nevertheless concerns over geopolitical risks remain.
Optimism in the agriculture sector is supported by favourable weather conditions and expectations of good harvests.
However, there are concerns of erratic weather patterns and challenges accessing credit to finance activity within the sector.
Growth prospects for the services sector over the next 12 months remain strong, driven by sector specific strategies and seasonality in sectors such as ICT, education, finance, real sector and health.
However, activity in the wholesale and retail trade, transport and storage sectors remain low due to subdued consumer demand.
According to the CBK Survey, firms in the agriculture sector firms reported the highest increase in production volumes during the quarter, attributable to the favourable weather conditions experienced during the period. On the other hand, the manufacturing sector reported the lowest growth in production volumes, largely on account of low consumer demand.
CEOs heading agro-based firms expect production to increase in the next quarter, supported by favourable weather conditions and seasonality (onset of harvest season).
Demand orders and sales prices are expected to remain stable.
In the manufacturing sector, CEOs expect production volumes, demand orders and sales growth to be lower. However, most firms plan to utilize their existing idle capacity to meet an unexpected increase in demand in the next 12 months.
 The CBK Survey also shows that the services sector will grow due to enhanced activity in the next quarter, largely on account of seasonality and sector specific growth in demand, driven by expansion strategies that firms are employing.
Findings of the survey show that most respondents are operating below capacity and could utilize the idle capacity to meet an unexpected increase in demand/orders.
 Majority of the firms reported high inventories, sufficient to cover a sudden increase in demand. Some firms reported possible difficulties in expansion, particularly due to increased cost of doing business, and liquidity constraints due to the increased cost of borrowing.
