Panorama econòmic

Economic indicators

Kenya has enjoyed a decade of strong economic growth, allowing the nation to access the status of a middle-income country. It has one of the fastest-growing economies in Sub-Saharan Africa, and growth was only partially affected by the COVID-19 pandemic, with GDP contracting by a mere 0.3%. The country returned to its growth path in 2021 (7.5%), 2022 (4.8%), and 2023 (5.6%, as per the IMF estimates). Following the strong cyclical rebound in 2023, the growth rate decelerated to 4.7% in 2024 as severe floods, subdued business sentiment following the mid-2024 protests, and reduced public spending weighed on the country's economy. The projected real GDP growth for 2025 and 2026 is around 5%, driven by a rebound in private sector activity, despite the government's implementation of spending cuts.

Regarding public finances, the fiscal deficit is projected to be 4.3% of GDP in 2025/26, down from 4.9% in 2024/25, according to the ministry's Budget Policy. Total spending is expected to rise to KES 4.34 trillion (USD 34 billion) in 2025/26, up from KES 3.95 trillion in the year ending in June. The government plans to finance the deficit through net external financing of KES 146.8 billion and net domestic financing of KES 684.2 billion. Persistent revenue collection underperformance and significant spending pressures have led to a rise in government debt in recent years; however, the IMF estimated that the debt-to-GDP ratio decreased to 69.9% in 2024 from 73.1% one year earlier, mainly due to a stronger shilling in the second half of FY24. The government plans to raise approximately USD 5 billion (nearly 4% of GDP) through official and commercial borrowing in FY25, with half of this amount sourced from multilateral creditors, including the final USD 0.9 billion disbursement from the IMF programme ending in April 2025 (Fitch Ratings). The government continues to accumulate pending bills, with domestic arrears rising to KES 528.4 billion (3% of GDP) by the end of September 2024, up from KES 516.3 billion at the end of June. Fitch projects the revenue/GDP ratio will increase in FY25-FY26, averaging 17.7%, though still below the government's initial target of 18.4%. Meanwhile, the inflation rate decreased from 7.7% in 2023 to around 5.1% last year and Kenya's central bank reduced its benchmark lending rate by a larger-than-expected 75 basis points to 11.25% in December 2024, citing room for looser policy to support economic growth as inflation remained under control. Over the forecast period, inflation is expected to remain relatively stable.

The unemployment rate was estimated at 5.7% in 2024 (World Bank). Kenya’s total workforce is projected to increase by 40.6% to 40.4 million by 2035; as data from the Kenya National Bureau of Statistics (KNBS) indicate the country will add 11.7 million to the job market by 2035, this may cause mounting unemployment in an economy that is not generating adequate jobs for school leavers and college graduates. Overall, the country’s GDP per capita (PPP) was estimated at USD 7,157 in 2024 by the IMF and the international poverty rate (USD 2.15) is estimated to have decreased from 35.8% in 2022 to 34.7% in 2023 (World Bank). However, economic growth has not been sufficiently inclusive, and the connection between growth and poverty reduction has weakened. Adverse climate shocks are reducing agricultural productivity, particularly in arid and semi-arid counties. Well-paying jobs in services are more accessible to skilled workers, while poorer and low-skilled workers face difficulties accessing productive employment. The poverty ratio stands at 38.6%, above the pre-pandemic level as poor and rural households have not participated as much in Kenya’s economic recovery. The recent deceleration in poverty reduction, coupled with unequal access to education and other opportunities, weak job creation, and consistently low productivity growth, underscores the necessity for an inclusive growth strategy.

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