Kenya is currently undergoing a cautious economic recovery, a development that has piqued the interest and optimism of global investors.
This recovery follows a reduction in political tensions and a moderation in food prices.
The most recent survey, the Stanbic Bank’s Purchasing Managers Index (PMI), indicates an improvement in trading conditions, albeit still weak.
The market anticipates that economic conditions and the business climate will continue to improve in the short to medium term.
Kenya’s economic recovery linked to political stability
This positive shift comes on the heels of political talks between the state and the opposition, which have created an atmosphere of political stability in the country.
According to the PMI report, the index has risen to 50.6 from 45.5, marking the first time it has surpassed the 50-point threshold since January 2023.
Analysts from Stanbic Bank and S&P Global, an American analytics firm, noted that this recovery was largely attributed to increased political stability, especially benefiting the services and manufacturing sectors.
Consequently, companies have increased their output, job creation has accelerated, and purchasing activity has picked up.
Firms have also grown more confident about their output prospects.
The report also highlights a decline in Kenya’s inflation rate to 6.73% in August, the first time it has fallen below seven percent in 16 months.
This is primarily due to a slower increase in food prices. Contributing factors include a 21.16% depreciation of the Kenyan shilling against the US dollar since the previous August and a government decision in July to raise the value-added tax (VAT) from 8% to 16%, resulting in higher fuel prices.
These factors have collectively contributed to the country’s high prices, particularly in a nation that imports more than it exports.