A group of analysts attached to multinational banks, consultancies, and think tanks have marginally downgraded Kenya’s economic growth outlook for 2025, citing concerns over inadequate rainfall, spending cuts in the public sector, and indirect hits from rising protectionist policies in global trade.
A consensus outlook from 14 firms, polled by Barcelona-based FocusEconomics, indicates the economy will likely expand 5 percent compared with a 5.1 percent projection last month.
Projected growth in gross domestic product — a measure of all economic activities by the government, companies, and individuals — should, however, be higher than the 4.6 percent estimation for 2024, the analysts say.
This will be supported by enhanced credit flow to the private sector on falling interest rates and relative stability in the macroeconomic environment.
“GDP growth should accelerate in 2025 from 2024 to around pre-pandemic levels as tailwinds from interest rate cuts outweigh drags from VAT hikes, drier weather, rising global trade frictions, and fiscal consolidation,” analysts at FocuEconomics said in the May 2025 edition of the FocusEconomics Consensus Forecast - Sub-Saharan Africa.
“Still, the outlook hinges on progress in debt deals with multilateral lenders. Social and political turmoil plus frail fiscal metrics are downside risks,” they added.
A gradual but steady fall in the cost of loans to an average of 15.77 percent in March from a recent peak of 17.23 percent last November amid largely muted inflation pressure is seen stimulating economic activity in the private sector.
Businesses had frozen investment projects in 2024 on the deterrent cost of borrowing amidst economic uncertainty that followed the deadly anti-government protests at the tail end of the second quarter and the start of the third quarter.
Stung by last year’s countrywide social unrests, the William Ruto administration has steered away from aggressive taxation measures for the year starting July and has instead pledged to focus on improving tax administration and cutting down on expenditure.
Analysts at UK’s Capital Economics have trimmed Kenya’s growth forecast by the biggest rate of 0.50 percentage points to 4.50 percent followed by Allianz of Germany to 4.80 percent from 5.2 percent a month earlier.
Economists at Washington-headquartered consultancy FrontierView now see the economy growing 5.50 percent from 5.70 percent the year before, while Goldman Sachs and Oxford Economics have each trimmed growth projection by 10 basis points to 4.80 percent.
Citigroup Global Markets, Economist Intelligence Unit, Fitch Solutions, JPMorgan, and UK’s Standard Chartered Bank have kept their growth outlook on Kenya steady at 5.5 percent, 5.3 percent, 5.5 percent, 4.8 percent and 4.7 percent, respectively, according to FocusEconomics.
Euromonitor International of UK has on the other hand, upgraded its growth outlook by 0.50 percent to 5.4 percent, Moody’s Analytics from 5.0 percent to 5.20 percent, Fitch Ratings to 5.10 percent from 5.0 percent while BNP Paribas see the GDP expanding 5.0 percent this year.
Others that have cut the economic growth projection for Kenya this year are the World Bank Group from 4.9 to 4.5 percent, the International Monetary Fund to 4.8 percent from 4.8 percent and African Development Bank from 5.1 percent to 5 percent.
GDP growth should ideally mean people are earning and spending more money. This should result in increased tax receipts which the government should ideally spend on improving public services such as education, healthcare, and security.
The GDP measure has, however, been criticised for not showing how income is split across various working groups, hence expansion in GDP could sometimes be a result of the rich getting richer and the poor getting poorer.
