Kenya’s economy is now expected to expand by 4.9% in 2025, up from 4.5% in May, according to the World Bank’s latest Kenya Economic Update.
The revision reflects easing inflation, accommodative monetary policy, stronger credit growth, resilient agriculture, and a decisive rebound in construction.
Construction Sector Recovery
According to the development lender’s latest comprehensive assessment, several of Kenya’s main industries, particularly construction, faced difficulties throughout 2024. Mounting concerns over the government’s deteriorating fiscal position dampened private sector investment and stalled major infrastructure projects.
However, the World Bank notes that this troubling trend has decisively reversed in the first half of 2025, with construction activity showing robust recovery momentum.
“Signs of recovery are emerging,” the report stated, highlighting that the rebound in construction between January and June 2025 successfully offset a slowdown in manufacturing.
Upward Revision from Previous Projections
The improved outlook translates into a revised 4.9% growth forecast for 2025, up from 4.5% in May. While a 0.4 percentage point increase may appear modest, it represents billions of shillings in additional economic activity and signals renewed confidence in Kenya’s trajectory.
The World Bank projects that Kenya will sustain this 4.9% growth rate through 2027, suggesting the recovery is durable rather than a temporary spike.
Manufacturing Sector Challenges
Kenya’s manufacturing sector, contributing just 8–9% of GDP, well below national industrialisation targets, continues to struggle. Key challenges include:
- High energy costs
- Supply chain disruptions
- Subdued domestic demand
- Intense competition from imports, especially Asian manufacturers, is benefiting from economies of scale
Regional integration under the East African Community Common Market has created opportunities but also intensified competitive pressures, as Kenyan firms face rivals from neighbouring countries.
Risks Ahead
Despite the improved forecast, risks remain:
- Heavy public debt burden at Sh12 trillion (68.7% of GDP)
- Fiscal consolidation pressures that could limit government spending
- Trade uncertainty, including the expiry of a U.S. trade deal with the region
- Structural barriers from state‑owned enterprises and restrictive investment rules
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