The Central Bank of Kenya (CBK) has adjusted its economic growth forecast for the country, lowering it to 5.5 per cent from the previous 5.7 per cent.
This move comes in contrast to the expectations of international experts, who predicted a 5 per cent growth for Kenya this year.
The revision, although slight, signifies underlying challenges and adjustments in the economic landscape.
Governor Doctor Kamau of the CBK conveyed the updated forecast on Wednesday, maintaining that the economy remains robust despite the downward adjustment.
“We anticipate a growth rate of 5.5 per cent for 2025, aligning closely with this year's projected growth of 5.4 per cent,” Thugge stated.
This forecast was announced a day after the CBK reduced its benchmark lending rate by 25 basis points, marking the first such cut in nearly four years.
In June, Thugge had steadfastly projected a 5.7 per cent growth for 2024, despite recent adverse weather conditions.
“Despite the recent flooding in some parts of the country, the economy is expected to remain strong in 2024, supported by the resilient services sector and robust performance of the agricultural sector,” he asserted during a news conference.
The Kenyan economy, having grown by an estimated 5.8 per cent in the first quarter of the year, faced a myriad of pressures including rising public debt which poses significant risks to financial stability.
Experts have consistently warned that the increasing debt burden could hamper future economic prospects.
Last year, the economy grew by 5.6 per cent, a rate that many hoped would be sustained or improved upon.
International institutions, like the World Bank, have also weighed in on Kenya’s economic prospects.
In April, the World Bank projected a 5 per cent growth for the country, driven by increased investment resulting from restored access to international capital markets. This influx is expected to bolster investor confidence, enhance capital inflows, and expand credit availability to the private sector through reduced domestic government borrowing.
The World Bank's latest Africa’s Pulse report outlines several growth drivers for Kenya. These include a recovery in agriculture and tourism, along with deeper regional integration. The report forecasts a steady growth of at least 5.2 per cent for the Kenyan economy in the 2025-2026 period.
Globally, the Economic Outlook projects a stable global GDP growth of 3.1 per cent in 2024, mirroring the growth rate of 2023, with a slight increase to 3.2 per cent anticipated in 2025.
Kenya's economic performance is expected to align with these global trends, albeit influenced by regional and domestic factors.
One of the critical aspects influencing Kenya's economic trajectory is the resilience of its services sector. The sector has demonstrated robust performance, even in the face of natural calamities such as the recent floods. This resilience has been a cornerstone of the CBK’s optimistic projections.
