Kenya's Economy to Grow Slowest in 2025 at 4%, Says World Bank

Kenya’s economic growth is projected to decelerate in 2025, primarily due to escalating public debt and fiscal constraints, according to a recent World Bank report.

The country’s growth rate, better known as total economic output, is expected to slow to 4.5%, down from 4.7% in 2024 and 5.7% in 2023.

The World Bank attributes this slowdown to several factors including high public debt which has ballooned to 65.5% of its Gross Domestic Product (GDP), limiting the government’s fiscal space for development initiatives.

Elevated Lending Rates will also contribute to the slowdown, in what the World Bank opines high lending rates which have discouraged private sector borrowing, despite lower inflation rates.

Also Read: Kenya’s Economic Growth Down to 4.7% in 2024, Says KNBS

The slow growth rate will also be occasioned by the decline in private sector credit. According to the Washington DC-based lender, credit growth to the private sector contracted by 1.4% in December 2024, a significant drop from 13.9% the previous year.

These challenges have particularly impacted key sectors such as manufacturing, finance, and mining, which are experiencing reduced credit availability and an increase in non-performing loans, especially among smaller banks.

In response, the World Bank recommends that Kenya implement targeted tax reforms, including the removal of certain consumption tax exemptions, to enhance fiscal health and reduce debt levels.

The Bank also suggests the need for improved revenue collection and fiscal consolidation to create a more conducive environment for private sector growth.