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Business conditions in Kenya worsen due to COVID-19 – report

NAIROBI, Kenya, May 6 – Businesses again saw activity declined sharply in April as the coronavirus disease pandemic disrupted operations in the country.

According to the Markit Stanbic Bank Kenya Purchasing Managers’ Index, output fell at a record pace as firms were hampered by falling demand, input shortages and lockdown restrictions.

Amid weaker sales in the Kenyan private sector, firms sharply lowered employment numbers in April, making it the biggest reduction since the company started data collection in January 2014.

Companies reported difficulties in obtaining inputs during April, mostly due to the weaker supply of items and constraints on vendors amid curfew policies in Nairobi.

According to the finding, delivery times lengthened at a record pace, while stock levels were curtailed sharply as firms noted that the duration of the pandemic remained unknown.

This uncertainty led to a rapid weakening in business expectations for the next 12 months, with sentiment falling to the secondlowest in over three years.

As a result, firms shedded jobs at the fastest pace in the survey history, with wages also reduced amid efforts to lower total costs. Despite falling output and employment, backlogs
eased for the second month running as inflows of new work decreased.

Weaker input demand meanwhile led to a softer uptick in raw material prices, although this was partly offset by shortages of goods such as foodstuffs and medicine.

Nevertheless, the overall easing of input price inflation encouraged firms to reduce selling prices, amid hopes that this would improve customer spending.

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Finally, despite lower expectations, Kenyan firms were still positive that the economy would grow over the coming year. Panelists widely cited that they would open new branches and increase spending on products, services, and marketing once lockdown measures were lifted.

These factors hence pushed the headline figure to 34.8, down from 37.5 percent in March to show a deterioration in performance.

Going forward, Jibran Qureishi, Regional Economist E.A said the longer the impact of pandemic, the more acute the impact on economic output will be, adding that estimates on future economic growth are likely to be very dynamic.

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