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Nairobi Business Monthly
Home»Briefing»Private sector braces for slow growth in 2025 despite recent marginal gains
Briefing

Private sector braces for slow growth in 2025 despite recent marginal gains

Antony MutungaBy Antony Mutunga12th March 2025No Comments3 Mins Read
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Business confidence was at one of its lowest points on record in February 2025, as only a mere 5% of the surveyed firms expect to record growth in 2025, according to the Stanbic Bank Kenya Purchasing Managers’ Index (PMI). This gloomy outlook is fueled by persistent worries about increased competition and lingering economic uncertainty.

This cautious sentiment persists even though the Kenyan economy managed to scrape together a fifth consecutive month of marginal growth as the Stanbic PMI increased from 50.5 in January to 50.6 in February. Only a slight improvement, growth remains fragile, as it continues to fall short of the long-term average of 51.2.

The modest growth was driven by a combination of factors, including a more stable economic environment and easing inflationary pressures. Business activity expanded at its fastest pace since November 2024, thanks to increased marketing efforts, expanded capacity, and the acquisition of new clients. New orders also rose for the fifth month in a row, with around 30% of firms attributing the uptick to effective marketing campaigns, innovative products, and stronger client referrals.

The Nairobi Law Monthly September Edition

However, not all businesses shared in the gains—22% reported a decline in new orders, citing customers’ financial constraints and heightened competition. This uneven performance highlighted the challenges many firms faced in driving sales, resulting in only a slight overall increase in new business.

Cost pressures also eased in February, with input prices rising at the slowest rate in four months. This was attributed to a weaker increase in purchase prices, which allowed firms to mark up their own charges more softly. Despite this relief, the overall mood among businesses remained somber.

Employment levels saw a modest uptick, with the seasonally adjusted employment index rising above the 50.0 neutral mark. However, the overall increase in employment was marginal, as 98% of surveyed firms reported no change since January.

Additionally, purchasing activity fell for the first time since July 2024, with Kenyan firms reducing their input purchases slightly. Weak buying activity was concentrated in the services and wholesale & retail sectors, which also saw declines in sales. Despite this, vendor performance improved, with average lead times shortening to the largest extent in three months. Competitive pressures were noted as a driver of greater efficiency among suppliers. Stocks of purchases increased slightly, driven by an uptick in new orders, although the pace of expansion was slower than the long-run trend.

It is clear the Kenyan economy is moving forward, but it’s doing so on shaky ground. Firms are especially wary of the challenges ahead, particularly in the face of high competition and economic uncertainty. How the private sector handles these challenges will determine who comes out on top in 2025 and who might be facing a year of losses.

The Nairobi Law Monthly September Edition
private sector growth
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Antony Mutunga

Antony Mutunga holds a Bachelors degree in Commerce, Finance from Jomo Kenyatta University of Agriculture and Technology. He previously worked for Altic Investment & Consultancy before he joined NBM team in 2015. His interest in writing ranges from business, economics and technology. He is also our lead researcher in matters business.

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