Money Markets
Kenya’s economy gains fresh impetus from rising optimism
The resumption of rains has boosted agriculture, offering hope that the sector will speed up Kenya’s recovery in the second half given that it’s the largest sector and its performance directly influences the economic fortunes of Kenya. Photo/JARED NYATAYA
Posted Thursday, July 29 2010 at 00:00
Hopes of stronger growth in the second half of 2010 and low inflation has lifted retailers’ confidence in the economy, causing a recovery despite traders recording flat sales over the last quarter, a new survey indicates.
The survey by TNS Research International, found that business-people are upbeat with a confidence level of 114 points in June from 87 points in March and 100 points in October 2009.
“This has however not had an immediate impact on sales and profitability. Most expect that business will improve in the next six month,” said the TNS report.
Jobless growth
The confidence index on the movement of goods at the retail shop remained little changed in June at 75 points from 74 points in March — a pointer that the optimism is yet to be felt.
This is also an indicator to jobless growth as money generated from the upturn is not trickling to rank and file consumers to support demand.
The survey indicates that retailers in rural areas — where 70 per cent of Kenyans reside — are the hardest hit.
The economy grew by 4.4 per cent in the first quarter of the year compared to a growth of 5.6 per cent in the same period a year earlier.
Treasury is projecting a growth rate of 4.5 per cent in 2010 and analysts have raised their forecast from four to five per cent.
Business leaders said that optimism has helped remove cost cutting, capital spending freezes and restructuring from their radar screens in favour of innovation and expansion into regional markets.
This is expected to translate into job creation and improve household incomes, hence raising the level of demand for goods and services in the economy while unlocking new investments.
“The monetary translation from the improved economy is not over, but it’s on the way,” said African Alliance Asset managers CEO Paul Mwai.
He added that recovery for agriculture — with farmers preparing for harvests in the third quarter — and increased lending, would support demand.
Kenya’s economy took its worst beating in 2008 thanks to the post-election violence, the global financial crisis and drought which battered agriculture.
RSS