Firms say banks cut credit by 5.8% in Oc­to­ber

The Star (Kenya) - - News Business - WEITERE MWITA @MwitaMartin

Busi­ness chiefs re­ported that avail­abil­ity of credit fell 5.8 per cent in Oc­to­ber, the first full-month that in­ter­est cap­ping law was in force, a monthly sur­vey showed yes­ter­day.

“Al­though fu­ture ex­pec­ta­tions rose marginally, up 0.5 per cent to 59.7, the lower fu­ture ex­pec­ta­tions in­di­ca­tor sug­gests Kenyan firms an­tic­i­pate that avail­abil­ity of credit will be lower in the fu­ture, as banks may be re­luc­tant to lend to riskier cred­its given the in­tro­duc­tion of the in­ter­est rate cap,” the Stan­dard Char­tered MNI Busi­ness Sen­ti­ment In­di­ca­tor re­port stated.

Pri­vate sec­tor ac­tiv­i­ties fell 3.8 per cent last to 61.3, as both new or­ders and pro­duc­tion dropped due to a de­cline in do­mes­tic de­mand.

The fall in the busi­ness sen­ti­ment was rel­a­tively broad-based with over­all busi­ness con­di­tions de­clin­ing 6.6 per cent month-on-month.

How­ever, most busi­nesses are still ex­pand­ing ac­tiv­ity, with in­di­ca­tors of de­mand and pro­duc­tion re­main­ing above the breakeven 50 level. Firms re­ported hir­ing more em­ploy­ees.

“Firms re­main gen­er­ally op­ti­mistic about the near-term out­look. Thir­teen of the fu­ture ex­pec­ta­tions in­di­ca­tors were equal to or higher than cur­rent con­di­tions,” the re­port states.

Most no­tably, the ex­port or­ders in­di­ca­tor in­creased sig­nif­i­cantly by 26.6 per cent month-on-month and moved back into ex­pan­sion­ary ter­ri­tory.

Busi­nesses re­ported ro­bust ex­ter­nal de­mand for agri­cul­tural goods in the lead-up to the hol­i­day sea­son. In­put prices dropped sig­nif­i­cantly as busi­nesses re­ported pos­i­tive ben­e­fits from lower fuel and elec­tric­ity prices, which, if sus­tained, could in­di­cate lower in­fla­tion in the com­ing months as they start to pass these on to their cus­tomers, the re­port states.

In­fla­tion was at 6.47 per cent in Oc­to­ber, the Kenya Na­tional Bu­reau of Sta­tis­tics data shows, up from 6.34 per cent in Septem­ber – the high­est level since Fe­bru­ary.

“The cur­rent con­di­tions in­di­ca­tor in­creased to 60.0 from 47.4 as com­pa­nies re­ported that ex­ter­nal de­mand had in­creased sig­nif­i­cantly, with some busi­nesses re­port­ing par­tic­u­larly strong de­mand for agri­cul­tural goods from over­seas in the lead-up to the hol­i­day sea­son.

Firms also ex­pect for­eign de­mand to re­main strong in the com­ing months,” the re­port ap­proved by StanChart head, the­matic re­search Mad­hur Jha reads.


KNBS boss Zachary Mwangi/

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