According to the latest CEOs survey by the Central Bank of Kenya (CBK), Kenyan CEOs have expressed optimism for growth and global expansion. This is despite uncertainties arising from continued geopolitical tensions and a modest global economic outlook. The more than 1000 respondents were drawn from multiple private sector entities and are optimistic that the recent easing of global inflation will be crucial to wider expansion.
The CEOs Survey also revealed improved optimism for the company and sectoral growth prospects in the next 12 months, with optimism regarding growth prospects for the Kenyan economy strengthening on the back of improved agricultural production as a direct result of the just-ended El Nino rains.
Across the economic pyramid, firms reported mixed business activity between October and December 2023 as compared to the preceding 3 months. Notably specific sectors experienced increased business activity due to seasonal and industry-specific factors.
Surveyed firms expect business activity in 2024 Q1 to improve. Seasonal factors are expected to support firms in financial services, tourism, and professional services sectors, the CEOs Survey notes.
Talent management, customer centricity, and expansion into new markets remain the key drivers of firms’ growth. In terms of constraining factors, respondents highlighted the business environment (cost of doing business), the economic environment (high inflation and the weakening Shilling), and increased taxation as domestic factors that could constrain their growth in the near term.
Externally, firms highlighted geopolitical tensions, energy prices, and macroeconomic volatility as threats to their expansion. Firms expect to mitigate these constraining factors through the management of costs and risks, digitization of their operations, and diversification of their businesses.
A stable macroeconomic environment, a stable Kenya Shilling, and an enabling business environment were highlighted as factors that could strengthen firms’ outlook in 2024.
Firms in the agriculture sector expect improved business activity on account of seasonal factors. Firms in the flower industry, in particular, expect increased demand, production, and sales associated with Valentine’s celebrations that happen across February and peak in mid-February.
The forecasted rainfall for the first quarter of 2024 is further expected to boost agricultural production in general. Majority of businesses in the manufacturing sector expect business activity to be the same or lower.
Respondents from the agricultural sector in the CEOs Survey note that they continue to hold onto unutilized inventory due to low consumer demand. The forecasted rainfall is, however, expected to yield a good harvest, hence some let up on input costs.
In the services sector, firms expect improved business activity due to seasonal factors. Firms in the tourism sector expect continued activity in the first quarter as businesses resume their normal operations after the December holidays. Nevertheless, high interest rates, increased taxation, and the impact of a weaker Shilling are expected to keep input costs elevated, with global geopolitical tensions potentially affecting supply chains. Purchase prices are expected to remain elevated for firms across all sectors.
The CEOs Survey revealed stronger optimism regarding growth prospects for the Kenyan economy on account of improved agricultural production. Respondents expect the agriculture sector to continue performing well due to forecasted favorable weather conditions.
Despite uncertainties arising from continued geopolitical tensions and a modest global economic outlook, optimism for global growth improved with respondents citing the easing of global inflation as the main reason for their optimism.
CEOs Survey And Outlook For The Agriculture Sector
The agriculture sector continued to report higher optimism for the growth prospects of their companies and sectors in the latest Survey compared to other sectors.
A significant majority of respondents in the manufacturing sector reported lower or the same growth prospects for their company and sector over the next 12 months.
Firms continue to experience the twin challenges of high input costs and reduced consumer demand which has been highlighted in past CEOs Survey. Nevertheless, respondents noted that improved agricultural production would support sector performance. In the services sector, growth prospects over the next 12 months are driven by sector-specific opportunities and strategies for growth put in place by individual firms.
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