Six out of seven key economic indicators show the country is in a tight spot as President William Ruto addresses the country on the State of the Nation on Thursday.
Inflation—a measure of cost of living over a 12-month period—rose for the third consecutive month in October, driven mostly by high fuel prices. However, food prices have begun to fall due to favourable weather.
The shilling has been trading at a record low of 151.3 against the dollar, data from the Central Bank of Kenya shows. A weak shilling means Kenyans pay more for imports such as fuel, fertiliser and wheat. A weak shilling also inflates the cost of servicing external debt.
Fuel consumption between January and June dropped to the lowest levels in more than five years, excluding the Covid-19 period, amid high pump prices that depressed demand as people kept cars at home.
Consumption of Super petrol dropped five percent to 1.01 billion litres from 1.074 billion litres last year while that of diesel fell four percent to 1.31 billion litres against 1.36 billion in a similar period, data from the Kenya National Bureau of Statistics (KNBS) shows.
A litre of petrol, diesel and kerosene have since crossed the Sh200 mark owing to high crude prices and the implementation of new tax measures, including the 16 percent value added tax (VAT).
The majority of Kenyan firms have also frozen expansion plans as operating costs rise amid persistent cashflow challenges, analysis of findings of Stanbic Bank Kenya’s Purchasing Managers Index (PMI)— a barometer for the health of the private sector—shows dropped to 46.2 points, the lowest reading since July.
The PMI shows business confidence among surveyed firms in manufacturing, construction, wholesale and retail, services, and mining has been weak since July.
However, the size of the economy has expanded in the second quarter of this year, offering a glimmer of hope as Dr Ruto tries to steady the ship.
The GDP in the second quarter grew by 5.4 percent from 5.2 percent in a similar period last year.
The recovery was mostly due to improved weather that saw agriculture post a positive growth.
