The recent anti-government protests hit retailers, construction firms, and farmers hardest hit. The demonstrations have paralyzed businesses in major towns. Anxiety over proposed new taxes in the Finance Bill 2024 fueled the unrest. This caused private-sector sales to drop sharply. Youth-led anti-tax protests turned into anti-government demonstrations. President William Ruto also recommended removing all clauses from the Finance Bill.
The Stanbic Kenya Purchasing Managers Index (PMI) also gathered feedback from 400 corporate managers. Uncertainty around the Finance Bill led customers to withhold spending. This also decreased output in all sectors except manufacturing.
“After two months of increased purchasing, firms reduced their purchases and inventories,” said Christopher Legilisho, an economist at Standard Bank. “Anticipated higher taxes caused a mild increase in input, purchase, and output prices. However, a stronger exchange rate and lower fuel prices kept costs in check.”
The PMI, measuring private sector activity, fell to 47.2 in June from 51.8 in May. Protests, involving hired goons, nearly shut down major cities and towns. Proposed taxes aimed to raise Sh346 billion for a Sh4 trillion budget. President Ruto aimed to balance the budget by 2027 with new taxes and cuts.
This plan faced challenges, including minimal borrowing levels. The budget deficit was expected to decrease from 5.7% of GDP to 3.3%. This complied with an IMF program requiring higher taxes and spending cuts. “Private sector output dropped in June due to fewer new business intakes,” analysts from Stanbic Bank and S&P Global also stated. “Economic conditions and protests hurt sales volumes.”
Job growth in the private sector slowed to its weakest rate this year. The labor market is strained by looting during protests. Allegedly, politicians hired goons to disrupt peaceful demonstrations.
