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The World Bank has cut Kenya’s 2025 economic growth projection to 4.5 percent from an earlier forecast of about 5 percent, citing heightened debt risks and falling private sector credit.
In its latest Kenya Economic Update released in Nairobi, the global lender said the revision marked a 0.4 percentage point drop from the December 2024 forecast, amid interest rates that remain elevated above historical averages.
The World Bank noted that credit to the private sector has continued to contract, driven by high interest rates, weak demand, and the effects of exchange-rate valuation.
“Kenya’s public debt remains at high risk of distress, with interest payments absorbing about a third of tax revenue. Reforms to strengthen fiscal sustainability in an equitable way while promoting inclusive growth and jobs are critical to revive a slowing economy and a weak labor market,” the report stated.
However, the lender projected that Kenya’s real gross domestic product will gradually recover in the medium term, with growth expected to rise to about 5 percent between 2026 and 2027.
READ: Kenya’s Economic Growth Slows to 4.7% in 2024 – KNBS Report
According to the twice-yearly update, some of the country’s macroeconomic indicators have shown improvement since 2024, including easing inflation, a stabilised exchange rate, and stronger international reserves. Still, the overall pace of economic expansion has slowed.
The World Bank attributed the slowdown to several challenges, including flooding, elevated interest rates, and subdued business sentiment following protests and reduced development spending.
“Despite improvements in Kenya’s macroeconomic indicators, the country continues to face structural challenges, including insufficient job creation and low wages, especially among the youth,” said Qimiao Fan, the World Bank country director for Kenya, Rwanda, Somalia, and Uganda.
