A consensus forecast report based on feedback from economists drawn from 14 world’s leading banks, consultancies, and thinks projected a slowdown in Kenya’s economic growth in 2024 by as much as 0.6 percentage points.
The International Monetary Fund (IMF) has lowered its gross domestic product growth forecast for Kenya for 2025 to five percent in light of the possible financial challenges occasioned by the anti-tax riots that led to the rejection of the Finance Bill 2024.
In April, the IMF had projected the country’s real GDP to grow 5.3 percent, on the back of the easing in consumer prices and declining interest rates, which were to be supported by increased State spending.
However, in its latest world economic outlook, Kenya’s real GDP growth for 2025 was revised downwards even as the multilateral financier maintained the economic growth for this year at five percent.
Kenya’s growth revision for 2025 mirrors that of the sub-Saharan Africa region, which has been revised downward by a 0.2 percentage point for 2024 and upward by a 0.1 percentage point for 2025.
“Besides the ongoing conflict that has led to a 26 percent contraction of the South Sudanese economy, the revision reflects slower growth in Nigeria, amid weaker-than-expected activity in the first half of the year,” said the IMF.
It projects sub-Saharan Africa growth to increase from an estimated 3.6 percent in 2023 to 4.2 percent in 2025, “as the adverse impacts of prior weather shocks abate and supply constraints gradually ease.”
Kenya’s faster growth of 5.6 percent last year compared to 4.9 percent in 2022 was largely due to favourable weather, which boosted the agricultural sector, the country’s economic mainstay.
The country’s macro-economic indicators—inflation, interest rates, and exchange rates—also adversely impacted the business environment leading to reduced demand even as firms froze hiring of workers due to depressed sales.
The government’s expenditure, a critical component of GDP, or the total monetary value of goods and services produced in the economy, was also hampered by a lack of fiscal space with the public sector slowing down on development spending.
Unlike the IMF and the World Bank whose growth forecasts are conservative, real GDP projections by the National Treasury and the Central Bank of Kenya (CBK) have been higher.
Both the World Bank and IMF have projected the country’s economic growth in 2024 to be five percent. In 2025, the World Bank sees the economy to growing by 5.3 percent.
Like the two Bretton Woods institutions, both the National Treasury and CBK expect the economic growth in 2024 and 2025 to be lower than last year’s.
The National Treasury projects the economy to grow by 5.2 percent this year and 5.4 percent next year while the CBK expects real GDP to grow by 5.1 percent and 5.5 percent respectively.
A consensus forecast report based on feedback from economists drawn from 14 world’s leading banks, consultancies, and thinks projected a slowdown in Kenya’s economic growth in 2024 by as much as 0.6 percentage points.
“Risks to the projection are skewed to the downside. Though President Ruto scrapped the tax bill, mass protests continued into the early part of quarter three,” analysts at Barcelona-based Focus Economics, the macroeconomic research firm, wrote in consensus outlook last week.
“Moreover, a stronger-than-expected La Nina (cold) weather pattern could undermine agricultural production. Overall, our Consensus is for economic growth to slow in 2024 as a whole from 2023, dragged on chiefly by softer momentum in public spending.”
A slowdown in economic growth is also expected to worsen the country’s unemployment rate in 2024. In a new report, the World Bank has put the unemployment rate in 2024 at 5.7 percent, slightly higher than the 5.6 percent registered last year.
Data from the national statistician shows that real GDP in the first and second quarters of this year underperformed due to contractions in sectors such as building and construction and flat growth in manufacturing.
The Stanbic Kenya Purchasing Managers’ Index (PMI), which measures the performance of key private sector indicators such as output, new orders, and employment—dipped slightly to 49.7 from 50.6 in August.
This year, the business community was rocked by a one-month youth-led anti-tax protests that created economic uncertainty and delayed consumer spending decisions.
The resulting political uncertainty, which rocked President William Ruto’s administration, exacerbated the cash flow challenge because of rising interest rates amid elevated cost of living pressures.
