Bank CEOs optimism in Kenya's economy grows to 81%

 

Captains of the industry in Kenya are very optimistic about the country’s ability to rebound after the Covid-19 shock.

Nevertheless, uncertainties regarding a possible second wave of the virus infection were noted.

The latest Market Perception index by Central Bank of Kenya (CBK) shows the level of optimism among bank CEOs which sunk to a year low of 44 per cent in May from a high of 92 per cent in January rose sharply to 81 per cent in September as Covid-19 restrictions eased.

Only 19 per cent of bank CEOs surveyed were pessimistic, the second least rate lack of confidence in the year after eight per cent reported in January.

The increased infection rate in April and May send lenders into a panic mode, with 56 per cent of CEOs in May not sure about the country’s economic growth.

A similar trend was witnessed among the non-bank private sector, with 59 per cent interviewed by CBK saying they were optimistic about the growth and three per cent very optimistic. This was a 12 per cent growth compared to July.

Speaking during post MPC  press briefing on Thursday, CBK governor Patrick Njoroge said MPC Private Sector Market Perception Survey conducted in September 2020, revealed a further improvement in optimism since July, with a greater expectation of increased economic activity in the next two months.

He said that factors that contributed to the high optimism included reduced Covid-19 infection rates, expected implementation of the government’s Economic Stimulus Programme.

''Others are the resilience of the agriculture sector, recovery of private sector credit growth and a rebound in consumer spending,’’ CBK said.

Exports of goods remained robust despite the pandemic, growing by 0.8 per cent in the period January to August 2020 compared to a similar period in 2019. Receipts from tea exports during the period under review rose by 17.1 per cent with increased output.

Horticulture exports remained strong, mainly reflecting the normalisation of demand in the international market and the availability of adequate cargo space.

Flower exports for the period September 1 to 27 were 141.3 per cent of the volume in September 2019.

Remittances were strong at $274.1 million in August 2020 compared to $214.3 million in August 2019.

For the eight months to August 2020, remittances were higher by 6.6 per cent compared to a similar period last year.

However, receipts from services exports remained subdued, declining by 22.4 per cent in the period to August 2020, reflecting weaknesses in international travel and transport.

This is offset by the prevailing low international oil prices. The current account deficit is projected at about 5.1 per cent of GDP in 2020.

According to CBK, leading economic indicators for the Kenyan economy for the third quarter-point to a strong recovery in economic activity from the disruptions witnessed in the second quarter of 2020.

''This improvement and resilience are supported by agricultural production, increased activity in key sectors particularly services with the easing of COVID-19 restrictions, normalisation of exports, and Government interventions to mitigate the impact of the pandemic,’’ CBK said.

The great optimism levels among private sector players and manageable microeconomics including stale inflation saw the apex bank maintain the base lending rate at seven per cent.