The World Bank has revised down Kenya’s economic growth forecast for 2025, cutting it by half a percentage point to 4.5 per cent, citing mounting debt, high lending rates, and a contraction in private sector credit.
Kenya, the largest economy in East Africa, has traditionally shown strong annual growth. However, the World Bank’s latest Kenya Economic Update, released on Tuesday, highlights how high public debt levels, heavy debt repayments, economic inequality, and governance challenges have hindered its performance.
The report explains that the Kenyan government has increasingly relied on domestic markets to finance its budget, due to reduced external funding. At the same time, unpaid bills and tax revenue shortfalls have weakened efforts to consolidate public finances.
Despite authorities maintaining stable inflation and foreign exchange rates since last year—allowing some easing by policymakers—real lending rates have remained high.
Private sector credit growth fell to minus 1.4 per cent in December 2024, compared with 13.9 per cent growth the previous year, according to the report.
Kenya’s debt currently stands at 65.5 per cent of GDP, placing the country in the “high risk of distress” category, the World Bank noted. The economy grew by 4.7 per cent last year, down from 5.7 per cent in 2023, partly due to civil unrest triggered by tax increases.
Source: Arisetv