The World Bank has raised its projection for Kenya’s economic growth this year to 4.9 per cent, and President William Ruto’s administration is expected to maintain that rate of growth over the next two years.
In a report on Monday, the Bretton Woods Institution increased the forecast from 4.5 per cent in May, pointing to the accelerating growth in the construction sector.
According to the World Bank, construction, a sector that was impacted by the 2024 protests, has reversed course, leading the institution to offer a positive outlook for the economy.
"Signs of recovery are emerging," the World Bank said, adding that the rebound in construction in the first half of 2025 had offset a slowdown in manufacturing.
In 2024, the construction sector experienced dismal growth at 0.1 per cent in the first quarter of 2024, a sharp decline from 3.0 per cent in the same quarter of 2023.
This slowdown was reflected in significant decreases in key inputs, including a 12.7 per cent drop in cement consumption and a 32.4 per cent decline in bitumen imports.
President Ruto on Thursday said that the country’s economy is expanding at between 5 per cent and 5.8 per cent.
This is a projection the government has maintained, with Treasury CS John Mbadi telling Kenyans.co.ke that he expects over 5 per cent growth back on fiscal consolidation.
Ruto, while addressing legislators during the State of the Nation Address, said, “Just this week, 14 of the world’s leading financial institutions, including Citigroup, J.P. Morgan, Standard Chartered, and Goldman Sachs, projected that Kenya’s economy will expand by between 5 per cent and 5.8 per cent in 2026.”
According to Ruto, this growth is pegged on lower credit costs, rising exports, improved household spending driven by low inflation, and a broadly stable macroeconomic environment.
However, despite the positive economic outlook, the World Bank warned that the government’s ongoing fiscal consolidation could impact economic growth.
Other factors are the expiration of AGOA, which lapsed in September, but Kenya has expressed confidence in reaching an extension with President Donald Trump’s administration before the year’s end.
The World Bank report laid out a set of reforms the government should carry out to boost competition and support investment and economic growth.
Ruto's economic advisor, David Ndii, in May, sounded an alarm over the sector, insisting it will continue to decline.
According to Ndii, the sector was declining because, at its peak, most construction projects were financed by debts, which the government is now halting.
''The construction boom was debt-financed. Party is over," Ndii revealed. But the new report, coupled with the government's aggressive push to build affordable houses nationwide, is offering a new lease of life.
