CEOs explain why manufacturing sector will struggle in next 3 months

Monday, June 10th, 2024 17:43 | By
CBK Governor Dr Kamau Thugge
CBK Governor Dr Kamau Thugge. PHOTO/@CBKKenya/X

Chief Executive Officers (CEOs) have painted a grim picture on the country's manufacturing sector in the next three months.

According to a survey released by the Central Bank of Kenya (CBK) on Monday, June 10, 2024, the company CEOs noted that the manufacturing sector will remain subdued in the third quarter that is between July, August, and September 2024.

Why the trend

The CEOs who took part in the CBK survey attributed the expected slow performance in the sector to reduced production volume. The executives noted that they are anticipating reduced demands and even low sales during that period.

"Business activity in the manufacturing sector is expected to remain subdued, as shown by the proportion of respondents expecting production volume, demand order and sales growth to be lower," the CBK's survey read in part.

"Firms will utilize their existing idle capacity to meet an unexpected increase in demand in the next 12 months."

Finance Bill's implications

According to the CEOs, the manufacturing sector will remain subdued due to the anticipated implications of implementing the Finance Bill.

The Finance Bill which is currently in the public participation stage proposes a raft of new tax policies which manufacturers have boldly opposed. The CEOs have added their voice indicating that the sector which accounts for a significant number of the country's employment will remain stagnant.

"The survey sought CEOs' expectations of business activity in the third quarter of 2024 relative to the second quarter of 2024. Majority of respondents reported expectations of subdued business activity in the next quarter, largely due to the expected fiscal measures in the Finance Bill 2024," the CBK survey read in part.

Expected outcome

With the sector projected to remain subdued, the CEOs noted that the employment rate is also expected to remain unchanged in that period.

65.4 per cent of the CEOs noted that the employment sector will remain unchanged while 23.4 per cent opined that jobs will dwindle.

Firms in the agriculture sector expect production to increase in the next quarter, supported by favourable weather conditions and seasonality and the demand orders and sales prices are expected to remain stable, CBK's survey detailed.

"The services sector is expected to record enhanced activity in the next quarter, largely on account of seasonality and sector specific growth in demand, driven by expansion strategies that firms are employing. However, uncertainty around fiscal measures, liquidity challenges, high cost of doing business and geopolitical risks are constraining factors," CBK noted.

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