Local firms’ foresee an economic rebound on further restrictions ease

Local enterprises foresee a potential economic rebound should government further ease restriction measures to contain the COVID-19 pandemic.

As the government readies to review current mitigation measures that have resulted in widespread economic disruptions, expectations on economic prospects over the next two months have trended towards the positive.

According to the Central Bank of Kenya (CBK) Monetary Policy Committee (MPC) survey undertaken in June, commercial banks are more optimistic on economic prospects at 51 percent while non-bank private sector firms have marked a 46 percent rate of optimism from 30 percent in May.

The optimism course is further anchored on recent fiscal policy interventions which include the Ksh.56.6 billion economic stimulus pack, renewed support for small and medium enterprises (MSMEs) and reductions on corporate tax, VAT and PAYE.

Economic activity is however expected to remain moderate in the short-run with the majority of firms maintaining pragmatism to output amidst continued uncertainties.

Banks largely expect a moderate pickup in credit demand over the next two months to the end of August as economic activity picks up in the eventuality of a further ease to restrictions.

“Bank respondents expected the gradual easing of restrictions put in place to fight the pandemic to lead to increased economic activities and trigger the need for financing,” noted the survey.

The demand for credit is however expected to stay depressed as long as restrictions with consumer confidence staying on the low along with rising unemployment, the closure of businesses and the reduction of households’ disposable incomes.

The hospitality sector is also marking a change in fortune with a return to forward hotel bookings.

According to the CBK data, the forward bookings at surveyed hotels are expected to peak at a maximum 52 percent and 61 percent of capacities in September and October respectively from a mere one percent in June.

Optimism on a near term economic rebound from an ease to restrictions is however diluted by fears on the hold to restrictions as the country continues to register an increase in COVID-19 positive cases.

On Wednesday for instance, the country marked its highest one day increase in positive cases as the number of cases rose by 301 to 6673.