Kenyan CEOs grow more optimistic about economy as festive spending lifts business outlook

Kenyan CEOs grow more optimistic about economy as festive spending lifts business outlook

The CBK survey shows rising confidence among Kenyan business leaders, with stronger customer orders, tourism and holiday spending expected to drive fourth-quarter growth despite high operating costs and global uncertainty.

Kenyan chief executives are increasingly optimistic about the country’s economic prospects over the next 12 months, betting on resilient domestic demand, rising customer orders and festive-season spending to drive growth despite mounting operating costs and global uncertainty.

The latest Central Bank of Kenya (CBK) CEO Survey shows improved confidence in both business performance and the domestic economy compared with the July survey, as companies anticipate stronger economic activity in the final quarter of the year.

The improved outlook is underpinned by expectations of increased festive-season spending, supported by tourism, lower borrowing costs, improved liquidity and a stable exchange rate.

“Respondents attributed the improved growth outlook for Kenya to resilient domestic demand, higher orders, and seasonal spending,” the CBK said.

Rising domestic and international tourism, greater adoption of technology and anticipated foreign investment are also expected to boost business activity and strengthen investor confidence.

However, the upbeat projections come amid elevated fuel, transport and other input costs that continue to put pressure on businesses and consumers.

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According to the apex bank, these expenses are squeezing business profit margins and reducing household purchasing power, while adverse weather, geopolitical tensions and weaker external demand pose additional risks to economic growth.

The survey indicates that business activity improved modestly in the third quarter compared with the preceding three months, with demand orders either increasing or remaining stable across firms.

Growth was supported by tourism, crop harvesting, new product launches, and increased domestic and export orders. However, weak consumer spending and rising production costs limited gains in some sectors.

Looking ahead, companies expect demand orders, sales and production to rise in the fourth quarter, driven by holiday bookings, social events and seasonal consumption.

Agricultural output is also expected to improve during the period.

Outlook varies across sectors

The survey shows that the anticipated recovery will not be uniform across industries.

Tourism, information and communications technology, financial services, and wholesale and retail trade are expected to benefit from increased economic activity.

Manufacturers, however, continue to face pressure from cheap imports, high input costs and subdued demand, which could constrain their performance.

Agriculture is expected to benefit from seasonal rains and harvesting, although high production and transport costs remain a concern.

Healthcare businesses anticipate improved activity as payments normalise. However, delayed payments from insurers and high import costs could limit growth in the sector.

Businesses cautious about capacity and hiring

Despite expectations of stronger demand, companies remain cautious about expanding their production capacity and workforce.

The survey found that 37.2 per cent of respondents could accommodate an unexpected increase in demand without difficulty, while 44.5 per cent anticipated some difficulty.

Another 14.6 per cent expected significant challenges, citing limited capacity, ageing machinery, raw-material shortages and insufficient working capital.

Employment is expected to remain largely unchanged in the fourth quarter as businesses seek to contain labour costs despite the anticipated increase in demand.

Global uncertainty remains a key risk

On the global front, most respondents expect economic growth to remain stable over the next 12 months.

However, conflicts in the Middle East and Europe, volatile fuel prices, trade disruptions and inflationary pressures remain key risks to the economic outlook.

The CBK survey also identified developments in the Middle East as the leading geopolitical concern among businesses.

Respondents indicated that any de-escalation of tensions in the region could help ease fuel and freight costs while reducing supply-chain disruptions.