Kenya’s economic growth rebounds

Amina Bakari and Brenda Oluoch-KNA

Kenya’s economic growth is projected to rebound to 5.3 per cent in 2025 and 2026, supported by the Bottom-Up Economic Transformation Agenda (BETA), improved agricultural productivity, and greater macroeconomic stability.

National Treasury Cabinet Secretary John Mbadi said Kenya’s economy has demonstrated resilience amid global shocks, with an average economic growth of 5.2 per cent in 2023 and 2024, outperforming global (3.3 per cent) and Sub-Saharan Africa (3.8 per cent) averages.

Despite domestic setbacks including drought and protests against the Finance Bill in 2024, the CS stated that the economy grew by 4.7 percent, driven by strong performance in agriculture and services sectors.

He was speaking at the launch of the 2025 African Development Bank (AfDB) African Economic Outlook (AEO) Country Focus Report (CFR) for Kenya.

In a speech read on his behalf by Senior Deputy Director at the National Treasury, Dr. Kenrick Ayot, the CS cited significant macroeconomic improvements highlighting inflation which declined from 9.6 per cent in October 2022 to 3.8 per cent in May 2025, while the Kenyan shilling strengthened from Sh159.7/USD in January 2024 to Sh129.3/USD by May 2025.

Additionally, he announced that the Central Bank eased the lending rate from 13.0 per cent in August 2024 to 9.75 per cent in June 2025, leading to a drop in interest rates, as the 91-day Treasury Bill rate fell from 15.9 per cent to 8.3 per cent, and commercial lending rates from 17.2 per cent to 15.7 per cent.

However, Mbadi cautioned that significant challenges remain noting, “We face rising demands for public spending, narrowing debt space, and the need to raise domestic revenues without stifling economic growth.”

He at the same time emphasized the need to mobilize domestic capital and reform fiscal and expenditure policies.

The CS acknowledged AfDB’s critical role in infrastructure, education, energy, and governance support but flagged persistent issues in donor-funded projects including financial gaps, weak implementation, and sustainability challenges.

Speaking during the event, AfDB Chief Economist and Vice President, Economic Governance and Knowledge Management Complex Prof. Kevin Chika Urama reiterated the continental focus of the AEO.

He observed that Africa’s GDP rose from 3.0 per cent in 2023 to 3.3 per cent in 2024 and is projected to reach 4.0 per cent by 2026, with East Africa leading the growth trajectory.

In addition, he commended Kenya’s performance in this context but cautioned against the continent’s mounting fiscal pressures.

“Africa pays up to 500 per cent more in interest than developed countries. This is a gross mispricing of African risk,” he said.

Further, Prof. Urama emphasized the need to harness five key forms of capital: fiscal (tax efficiency, debt reduction), natural (sustainable resource use), business (MSME support), human (education, healthcare, diaspora engagement), and financial (capital markets, green finance, remittances).

He also urged stronger institutions, governance, and regional integration.

AfDB’s Principal Country Economist for the Eastern Africa Regional Office, Caroline Bernice Akishule, presented insights specific to Kenya.

She said the economy slowed to 4.6 per cent in 2024, down from 5.6 per cent in 2023, mainly due to weak industrial output and climate-related shocks.

“Inflation eased to 4.5 per cent, the shilling continued to strengthen, and foreign reserves reached USD 10.1 billion. Yet, public debt remains elevated at 65.7 per cent of GDP, placing Kenya at a high risk of debt distress,” she reiterated.

Akishule insisted that sustainable and inclusive growth must be underpinned by institutional strengthening, judicial independence, digitized public finance, and transparent governance.

She said the launch of the 2025 AEO Country Focus Report marks both a reflection on Kenya’s progress and a strategic call to action.