Private sector leaders are uncertain about Kenya's business future due to rising inflation, upcoming general election and volatility in the global marketplace.
The monthly Purchasing Managers Index for March shows the future output index fell to its lowest level in the entire history of the survey.
Managers polled said the ongoing Russia-Ukraine crisis has added a wound to the global supply chain that was disrupted by Covid-19 control measures, negating business recovery.
They are also concerned about rising fuel prices in the global market and the depreciating shilling, a move likely to push up production and import bill.
Bloomberg has tipped a barrel of oil to cross the $115 market by August, the highest level since the 2008 global financial crisis.
In Kenya, a litre of Super Petrol is currently trading at just below Sh135 and is expected to cross past Sh150 in the upcoming price review, with or thought fuel subsidy plan.
The shilling on other hand has shed more than five per cent in value against the greenback and is expected to drop more as the US hikes its interest rate regime and on the ongoing crisis in Ukraine.
Yesterday, it closed at Sh115.10 against the greenback.
As the result, overall PMI dropped from 52.9 in February to 50.5 in March, signalling a slower and only marginal improvement in the health of the Kenyan private sector economy.
A PMI of 50.0 signals an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Also contributing to the fall in the headline index was a much softer rise in new business volumes, as panellists saw a drop-off in client demand as inflationary pressures soared.
Price gauges for both business costs and charges reached their highest levels since early-2014, as purchase prices were reportedly exacerbated by the war in Ukraine and government taxes.
According to anecdotal evidence, worries over the impact of the war on global supply meant that inputs such as fuel, food products and fertiliser rose sharply in price.
Similar sentiments on the business environment in the country are shared by chief executive officers of banks and non-banking institutions in the latest survey by the Central Bank of Kenya.
According to CBK governor Patrick Njoroge, respondents were concerned about the impact of the Russia-Ukraine conflict on commodity prices and supply chains, in addition to the increased political activity.
They are, however, more optimistic that the country's economy will continue to expand.
"The optimism is attributed to reduced Covid-19 infection rates, anticipated favourable weather conditions, and increased infrastructure spending.
They are hoping that the current credit flow to the private sector will help businesses recover and grow jobs, projecting the economy to expand six per cent in the current financial year ending June 30.
The country has witnessed growth in private sector lending since the repeal of the interest capping regime in 2019.
Data by the apex bank shows growth in private sector credit increased to 9.1 per cent in February 2022, from 8.6 per cent in December 2021.
Strong credit growth was observed in the following sectors; transport and communication (24.1 per cent), manufacturing (7.6 per cent ), trade (8.9 per cent), consumer durables (14.0 per cent), and business services (11.6 per cent).
The number of loan applications and approvals remained strong, reflecting improved demand with increased economic activities.
The Survey of Hotels revealed continued recovery in the sector, with a majority expecting a return to a pre-pandemic level of operations by the end of 2022.
