High inflation bad for nascent smaller enterprises

Business Daily Kenya: 

inflation on the rise

MORRIS ARON

Inflation hit an 11-month high in January driven mainly by increased food prices. Data coming from Kenya National Bureau of Statistics indicated in which inflation—the general rise in cost of Great along with services—stood at 6.99 per cent, up coming from 6.35 per cent in December.

the idea will be of concern in which inflation was driven by goods inside the basic needs bracket, things in which money will have to be spent on. Prices of vegetables, grains along with flour were partly pushed up by prevailing drought conditions. This specific cannot be a Great thing for a smaller along with medium enterprise (SME).

A rise in inflation means in which potential customers have to dig deeper into their pockets or basic necessities. This specific will be not a sign of a healthy economy because the idea means in which less will be left to spend on the goods along with services offered by SMEs.

For SMEs, even a smaller increase in inflation could hurt capital expenditure along with increase the cost of production. As opposed to larger corporations in which are better positioned to handle inflation, SMEs are vulnerable as their margins are hit directly.

Typically, high inflation often affects currency exchange rates negatively along with brings about an export slump—meaning in which if your SME deals in exports, the idea will make less returns.

A rise inside the cost of goods along with services in Kenya makes the same uncompetitive on both global along with regional scale. however even as SMEs rejoice at the recent rainfall—inflation usually declines when the rain falls—the bigger worry with inflation will be if the idea will be erratic. The last couple of months have pointed to a slightly stable trend.

Also, the inflation figures are still within the government target of between 2.5 along with 7.5 per cent. However, as long as inflation rates remain steady, along with the economy continues to grow, SMEs should find growth unimpeded. For right now, SME entrepreneurs should pray for a rain god.

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High inflation bad for nascent smaller enterprises

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