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Kenya’s Private sector decline eases in December

The Kenya private sector has over the years substantially contributed to the country's economic development process. Figures indicate that the sector contributes over 80% of the GDP, a substantial percentage of total employment, and the bulk of export earnings.

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By Remie OTIENO

Kenya’s services sector reported improved growth in new business for the second straight month in December, helped by easing inflation, increased demand, and good weather, according to the S&P Global Kenya Purchasing Managers’ Index (PMI).

The headline PMI surged to 51.6 during the month from 50.9 a month earlier. A reading of 50 on the index indicates no change in business activity levels.

It further showed that new business rose at the sharpest rate since February, leading to accelerated increases in output and employment.

Firms saw costs increase to the smallest extent in a year during the period under review. – Many Kenyan firms accelerated staff hiring for the second month on the bounce – the fastest seen since March 2022.

“December PMI paints a positive picture for the Kenyan economy, in line with the series average. It comes as no surprise to see activity expand, perhaps due to favorable weather conditions and softer price pressures before a challenging 2023,” noted Mulalo Madula, an economist at Standard Bank.

While that growth was seen in sectors like agriculture, manufacturing, wholesale, and retail sectors, the PMI reading indicates that activities fell in the services and construction sectors.

Also Read:

Kenya’s private sector activity drops to a 9-month low

What is the role of the private sector?

The private sector plays a vital role in the economy by creating jobs, providing goods and services, and stimulating economic growth. It is an important source of tax revenue for governments.

What is the main aim of private sector?

The private sector has a goal of making money and employs more workers than the public sector. A private sector organization is created by forming a new enterprise or privatizing a public sector organization.

Who controls the private sector?

Private sector organisations are owned by individuals. These businesses are driven by profit. The profit from private sector organisations benefits the owners, shareholders and investors. They are financed by private money from shareholders and by bank loans.

Why private sector is better than government sector?

Advantages: Money is the biggest reason why people prefer private-sector jobs. Along with the higher salary, you also get regular appraisals and promotions based on your performance. In the private sector, your career growth is related to your performance.

Indeed, the Kenyan shilling remained steady last week on Wednesday when commercial banks quoted the shilling at 123.35/55 per U.S. dollar, the same level seen the day before.

The value of the shilling against the US dollar lost more than 8 percent in 2022, hitting repeated record lows on a wilting global economy leading to high rises in the inflation rate.
Kenya’s inflation rate slowed for the second consecutive month to 9.1 percent in December 2022, which was the lowest since August when the figure stood at 8.5 percent.

Inflation is the gradual rise in prices throughout an economy. In Kenya for instance, economic experts use indexes like the Consumer Price Index (CPI), which measures the change in prices paid by consumers for housing, food, and fuel, or the personal consumption expenditures price index which measures how much prices change over time.

When inflation rises, the value of the Shilling is worth less than they were in the past. As a result, people have less purchasing power and need to increase their incomes to maintain the standard of living they are used to.

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