NAIROBI, Kenya – Kenya’s economy is projected to expand by 5.0% in 2025, up from 4.6% last year, signaling renewed momentum driven by strong performance in agriculture and key service sectors such as fintech and mobile money.
The forecast, released in the African Development Bank’s (AfDB) latest African Economic Outlook 2025, reflects a cautiously optimistic view of the country’s ability to withstand both global and domestic headwinds.
“This projection underscores Kenya’s economic resilience amid a turbulent global landscape and enduring local pressures,” the AfDB stated in the report.
The regional lender credited the growth outlook to favourable weather conditions for agriculture and a more stable macroeconomic environment, including easing lending rates and lower global oil prices.
Short-Term Gains, Long-Term Risks
Despite the positive momentum, the Bank flagged several risks that could limit the pace of growth in the medium term.
Kenya’s GDP growth is expected to dip slightly to 4.8% in 2026, as vulnerabilities mount.
Among the key challenges: growing debt service obligations, persistent inflation, currency depreciation, and geopolitical instability—both regional and international.
“Deepening geopolitical fragmentation, emerging trade barriers, and regional conflicts continue to cloud the short and medium-term outlook,” the report warned.
Debt and Fiscal Pressure Remain
Kenya’s fiscal space remains under strain. The report echoes recent concerns by the World Bank and IMF over rising debt levels and the high cost of debt servicing, which threatens to crowd out critical investments in public services.
Still, Kenya remains one of the most dynamic economies in the region.
The shilling was recently named Africa’s best-performing currency in 2024 by the World Bank, and IMF analysts also raised their growth forecast for Kenya to 4.8% next year.
East Africa Stays Strong
The broader East African region is set to remain the continent’s growth engine, with overall growth projected to rise from 4.3% in 2024 to 5.9% by 2026.
Notable regional highlights include:
- Tanzania: Growth forecast raised to 5.9% in 2025 (up from 5.6%)
- Rwanda: Still robust at 7.8% in 2025, though down from 8.9% in 2024
- South Sudan: Poised to rebound with 4.0% growth in 2025 after a deep contraction in 2024
- Uganda & Somalia: Both face marginal downward revisions
However, not all countries are on the upswing. Sudan is expected to shrink by 0.6% next year, an improvement over its -12.8% collapse in 2024.
Continental Outlook: Growth with Fragility
Across Africa, GDP growth rose from 3.0% in 2023 to 3.3% in 2024, largely supported by public spending and private consumption.
Yet the AfDB downgraded its 2025–26 projections for the continent to 3.9% and 4.0%, respectively, citing increased trade tensions and tighter global financing conditions.
