Kenya is likely to experience slower growth in 2017 with more firms expecting demand, production and profitability to fall in the first few months of the year.

According to the Standard Chartered Business Sentiment Indicator (BSI) released here this week, although businesses recorded growth in December 2016 because of seasonally stronger demand and production in the lead-up to Christmas, more companies have reduced expectations for this year.

The BSI for the three-month average for the fourth quarter of 2016 was 60.4, compared with 60.1 in Q3 as businesses reported that activity was generally slightly stronger.

Four of the five indicators under consideration — new orders, production, supplier delivery times and employment — rose in December, while order backlogs were broadly unchanged.

According to the BSI report from the bank, Kenyan firms reported that their financial positions improved slightly in December, possibly as a result of strong seasonal demand. This prompted firms to improve their productive capacity to meet higher demand.

As the Kenyan shilling continues to strain against the US dollar, companies reported that the effect of the exchange rate on their businesses is still negative.

Despite the positive trends in December 2016, Standard Chartered Bank’s Chief Economist for Africa, Razia Khan, says Kenya could experience slower growth in 2017 as firms expect to reduce production due to reduced demand as well as to employ fewer people.

This adds to the various concerns raised by investors in the country over the current political climate this election year.