The World Bank has raised Kenya’s economic growth forecast for 2025 to nearly five per cent, citing a renewed surge in activity within the construction sector, one of the key pillars under President William Ruto’s administration.
After a difficult 2024 marked by financial uncertainty and stalled projects, several of Kenya’s major industries, including construction, began to regain momentum this year, the lender said in its latest economic update.
In its latest report, Kenya’s economy is expected to grow by 4.9 percent, an uptick from its earlier forecast of 4.5 percent.
“Signs of recovery are emerging,” the report noted, highlighting that the rebound in construction during the first half of 2025 has helped counterbalance slower performance in the manufacturing sector. As a result, the World Bank now expects Kenya’s economy to expand by 4.9 percent in 2025, an upgrade from the 4.5 percent projection it issued in May. Growth at roughly this pace is anticipated to continue over the following two years.
However, the outlook remains vulnerable to external and domestic pressures, where the multilateral lender cited uncertainty in global trade, key among them being the pending expiry of a U.S. trade agreement, and Kenya’s ongoing fiscal consolidation, which could also limit government spending, the report warned.
Officials in Nairobi acknowledge that the country’s growth prospects have been constrained by a heavy public debt burden, which has consumed a large share of national revenue through substantial annual repayments.
Infrastructure Push Amid Fiscal Strain
To ease funding pressure and revive stalled infrastructure works, the government has turned to innovative financing models, including loans backed by motorists’ road maintenance levies on petrol.
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This has enabled payments to contractors who had previously abandoned sites over delayed disbursements.
Kenya is also in negotiations with the International Monetary Fund (IMF) for a new financial support package. But discussions have hit sticking points, particularly regarding whether the securitised infrastructure loans should be classified as part of public debt.
In its report, the World Bank outlined critical reforms needed to strengthen competition, attract investment, and support longer-term growth. It pointed to barriers created by more than 200 state-owned enterprises that enjoy preferential treatment, distorting market competition, as well as restrictions that limit foreign investors’ participation in the economy.
“There is significant room to make Kenya’s regulatory framework less restrictive to competition,” the Bank said.
Kenya’s key trade relationships—especially with the United States—are also poised to influence future export performance if market access terms change.
Meanwhile, elevated debt servicing costs continue to squeeze government budgets, increasing the need for creative but sustainable financing strategies.
The path to durable and inclusive growth, the Bank argued, lies in structural reforms.
It said that by creating a level playing field for private-sector players and easing constraints on foreign investment, Kenya can unlock new capital, spur job creation, and build a stronger foundation for stable, long-term economic expansion.
