Kenya’s economy has been projected to grow at a slower pace for the next two years, this is according to a report published by the International Monetary Fund (IMF).
In its Global Economic Outlook report published on October 22, the Bretton Woods Institution projected the country’s Gross Domestic Product (GDP) to drop from 5.6 to 5.0 in 2024 and retain the same level in 2025, depicting a worrying trend for President William Ruto’s administration.
Gross Domestic Product (GDP) is the standard measure of a country’s economic health and is used as an indicator of the living standards of citizens. A country can experience a drop in economic drop when its GDP subsides.
The projected drop in Kenya's GDP could potentially slow down business activities and result in job losses and low production by private and public sectors. Manufacturers could similarly shut down their facilities due to poor returns on investment.
In 2023, Kenya’s economy grew to 5.6 per cent, up from 4.3 per cent in the previous year mainly boosted by agriculture and growth in services. Services accounted for 69 per cent of the growth and agriculture for 23 per cent.
Kenya’s inflation also dropped drastically over nine months from 7.7 last year to a staggering 4.3 per cent in September 2024 mainly backed by favourable fiscal and monetary policies implemented by the government over the nine months from January.
Despite the recent resurgence, Kenya joins the list of countries whose GDP projection in the next two years reflects negative change, other countries whose economies were predicted to grow at a slower pace in the coming years include the Democratic Republic of Congo, Ethiopia and Mali.
However, the IMF forecasted significant economic growth for several African economies including; Nigeria, Angola, Ghana, Senegal, Tanzania, Cameroon and Uganda.
The projection comes amidst tight lobbying between the government and the IMF for the disbursement of Ksh474 billion ($3.6 billion) which was suspended following President Ruto's decision to withdraw the Finance Bill, 2024 that proposed a raft of tax measures in line with the IMF recommendations.
In June this year, President Ruto was forced to scrap the piece of legislation after Kenyans took to the streets to demonstrate against the bill that sought to introduce several taxes on products and services. Despite slowing the anti-government demonstrations, the decision placed him at the centre of criticism by the IMF.
The United States Ambassador to Kenya Meg Whitman while speaking during an interview on Citizen TV in August this year revealed that the loan approval that was supposed to take place on June 12 was cancelled after the government contravened the agreement it reached with the multilateral institution.
"The IMF was going to approve a disbursement around June 12 but when the Finance Bill got pulled down, they could no longer do it. I believe it is important for that disbursement to be given out because Kenya faces a very difficult situation," the US ambassador stated.
