Treasury revises 2024 economic growth forecast to four-year low

A trader sorts fresh fruits at his stand in Nyeri town market on January 6, 2025.

Photo credit: Joseph Kanyi | Nation Media Group

The Treasury has revised the country’s 2024 economic growth forecast downwards by 60 basis points, following a slower-than-expected performance in the first three quarters and poor credit to the private sector.

The Treasury now estimates that the economy grew by 4.6 percent last year, a downward revision from the 5.2 percent Gross Domestic Product (GDP) growth, it had projected four months earlier in another policy document by the finance ministry.

At 4.6 percent, this is the slowest growth in four years. The new forecast would also be translated as a seven-year low—barring the pandemic period in 2020, when the GDP, or total economic output, contracted by 0.3 percent.

“Taking into account the performance of the economy in the first three quarters of 2024, and the slowdown in private sector credit growth to key sectors of the economy, growth is estimated to expand overall by 4.6 percent in 2024 and 5.3 percent in 2025,” Treasury said in a draft Budget Policy Statement for 2025 published at the weekend.

The numbers on economic performance in the first three quarters of last year, were released by the Kenya National Bureau of Statistics (KNBS). KNBS is expected to publish the GDP growth numbers for 2024 before the end of April.

In the first three quarters, real GDP growth was slower than in the corresponding quarters in 2023, as the economy struggled to recover from the effects of reduced private sector credit due to high interest rates.

The Treasury’s projection is slower than the World Bank’s at 4.7 percent in 2024.

Another Washington-based institution, the International Monetary Fund (IMF), has projected the economy to grow by a faster rate of 5.0 percent, similar to 2025.

President William Ruto-led Kenya Kwanza government is banking on his Bottom-Up agenda to stimulate the economy, that is yet to recover from a crippling drought in 2020, Covid-19, and the war in Ukraine that has disrupted the global supply chain.

The Treasury expects the economy to recover this year, growing by 5.3 percent on the back of a robust services sector, recovery of the manufacturing sector, improved agricultural productivity and improvement in exports.

“The outlook will be reinforced by the implementation of policies and reforms under the priority sectors of the Bottom-Up Economic Transformation Agenda and improvement in aggregate demand,” said the Treasury.

​​​​​​​“Additionally, implementation of prudent fiscal and monetary policies will continue to support economic activity,” added the Treasury.

The economy grew by 4.0 percent in the three months to September last year, the slowest growth in four years.

Most sectors decelerated from the same period in 2023, while construction and mining contracted. In the third quarter of 2023, the economy grew at 6.0 percent.

A consensus forecast report based on feedback from economists drawn from 14 world’s leading banks and consultancies, 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 year.

“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 report, the World Bank estimated that the unemployment rate in 2024 would be 5.7 percent, slightly higher than the 5.6 percent registered in the previous year.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.