Business Mood Plunged to 16-Month Low in Kenya After Elections

Monique Vanek
·2 min read
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(Bloomberg) -- The decision by Kenya’s Supreme Court to uphold William Ruto’s victory in last month’s presidential vote may boost business confidence, after a gauge of sentiment fell to its worst level in more than a year in August.

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The purchasing managers’ index compiled by S&P Global and Stanbic Bank dropped to 44.2 from 46.3 in July -- the sixth straight decline and the lowest level since April 2021, when most of East Africa’s largest economy was in lockdown to stem the spread of Covid-19.

Election-related disruptions and political uncertainty caused the drop and added to sustained declines in output and new orders, said Mulalo Madula, an economist at Stanbic Bank.

The Supreme Court on Monday dismissed a petition by rival presidential candidate Raila Odinga to overturn the outcome of the Aug. 9 vote. The decision is a major step toward ending political uncertainty and may boost private-sector investment. Several previous election disputes in Kenya have degenerated into violence, the worst of which occurred in 2007 and claimed the lives of at least 1,100 people.

Price growth will be another key determinant of business conditions. Only 10% of respondents gave a positive forecast for output over the next 12 months, amid fears that an inflation-driven downturn in the economy will continue, the survey found. Respondents were surveyed from Aug. 12 to 26.

While lower demand suppressed inflationary pressures in August, with costs and charges rising at the softest rates since January, “the trajectory of underlying cost pressures could depend on the timing of the removal of fuel subsidies in addition to the upcoming short rain season, which will be key for food inflation,” Madula said.

Parts of Kenya have been experiencing a severe drought since late 2020 and there is no indication when it will break. Fuel subsidies that have helped keep pump prices stable after Russia’s invasion of Ukraine caused global oil costs to surge are likely to end in December.

Read more: Supreme Court Upholds Ruto’s Kenya Presidential Election Win )

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