The East African drought subdues expected improvement in the business environment (October - December 2016)

The East African drought subdues expected improvement in the business environment (October - December 2016)

The Business Climate Index (BCI) improved marginally during the current (October – December 2016) quarter. The index score (87.97) improved by less than a percentage point from that (87.06) of the preceding (July – September 2016) quarter. Despite this improvement, however, the conditions for doing business remain well below potential. This is the sixth consecutive quarter that the business climate index has indicated unfavourable business performance and points to persistent vulnerabilities and uncertainties in the business environment. This persistent dip is largely driven by unexpectedly poor performances in the agriculture and manufactures sectors. Similar to the last quarter, agricultural output was largely subdued by the East African drought and the manufacturing sector was challenged by a weakening local currency leading to rising input costs. Perceptions about future business sentiment (January – March 2017) indicate a worsening business performance largely driven by subdued activity and employment cost in the services sector. While, business in the agricultural and manufacturing sector is expected to pick up in next quarter (January – March 2017), the performance is anticipated to remain below potential.

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