Kenya private sector up slightly in May, outlook poor

An aerial view of Nairobi CBD. FILE PHOTO | NMG 

NAIROBI (Reuters) -

By REUTERS
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Summary

• Kenya’s private sector activity inched up in May after falling sharply a month earlier because of restrictions to curb the spread of coronavirus, but conditions are expected to worsen in coming months, a survey showed on Thursday.
• The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) came in at 36.7, higher than April’s 34.8 but still well below the 50 mark that separates expansion from contraction.

Kenya’s private sector activity inched up in May after falling sharply a month earlier because of restrictions to curb the spread of coronavirus, but conditions are expected to worsen in coming months, a survey showed on Thursday.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) came in at 36.7, higher than April’s 34.8 but still well below the 50 mark that separates expansion from contraction.

“Driving the downturn was a considerable fall in output levels in May, as businesses reported lower activity due to weak sales,” the survey compilers said in a report.

“Demand levels were again impacted by travel restrictions around Nairobi and Mombasa, which meant some firms were unable to acquire inputs.”

Tourism and horticulture, leading sources of foreign exchange, have been hit hard by the coronavirus crisis, as have transport and manufacturing.

By Wednesday, Kenya had 2,216 confirmed coronavirus cases, with 74 deaths. It has imposed a daily curfew, banned public gatherings and asked people not to leave home unless absolutely necessary, as well as halting movement into and out of five regions including the capital, Nairobi.

The survey said many firms cut jobs in May, while exports fell due to travel curbs and lockdowns in overseas markets.

The government has cut its economic growth forecast for 2020 to three percent from six percent, or 2.5 percent if the crisis worsens.

Last week, the central bank said small and medium-sized businesses needed urgent help to survive, with many at risk of closing by the end of this month.

Firms expect conditions to remain poor over the next year, the survey showed.

“We still expect the epicentre of Covid-19 to be felt in Q2, with respect to economic activity. Business conditions have contracted for five consecutive months now,” said Jibran Qureishi, regional economist for East Africa at Stanbic Bank.