In the October – December quarter of 2012, the business climate index declined to 4.5 points having recorded a score of 8 points in the previous (July – September) quarter. The deterioration of business environment perceptions emanated from elevated risks arising from the budget support withdrawals by some development partners and anxiety over potential business interruptions emanating from the presidential elections in neighbouring Kenya. Expectations for the next quarter are such that the business climate will start to improve but at a slower pace compared to the previous quarter. The drivers of the expected business climate improvement are anchored on the expected continuity in macroeconomic stability, recovery in domestic demand, and an upturn in the global economic outlook that is expected to boost export demand. On the overall, the business environment remains largely unchanged, having improved only modestly, and is expected to remain weak in the short term.