The Central Bank of Kenya (CBK) has cut its 2025 growth forecast to 5.2% from 5.4%, blaming higher trade tariffs but nonetheless expecting stronger yields in the agriculture and service sectors, improved exports, and a rebound in private sector lending.
- •US President Donald Trump has dusted off his tariff playbook, slapping fresh duties on a wide range of imports in a bid to shield U.S. industries.
- •Kenyan industries and productive energies are still heavily reliant on open markets and steady demand abroad.
- •The World Bank also has lowered its growth outlook for Kenya, lowering the 2025 forecast by 50 basis points to 4.5%, citing mounting fiscal pressures and a challenging global environment.
- •The Bretton Woods Institution also revised its 2026 projection downward by 20 basis points to 4.9%, marking a more cautious view compared to its estimates six months ago.
In the statement following the Monetary Policy Committee (MPC) meeting, CBK reveals that the CEOs and Market Perceptions surveys conducted in May indicated optimism over economic prospects, helped by favorable weather conditions, declining interest rates, and improved agricultural output.
The Kenyan economy grew at a slower pace in 2024, with real GDP expanding by 4.7% compared to 5.7% in 2023, according to the Economic Survey 2025. The deceleration was driven by a sluggish performance across certain sectors, though early indicators suggest the economy is gaining momentum in 2025.
Kenya’s external position also strengthened, with the current account deficit narrowing to 1.8% of GDP in the 12 months to April 2025, driven by resilient exports such as horticulture and coffee, and a 12% surge in diaspora remittances. The central bank’s foreign exchange reserves rose to US$10.8 billion, equivalent to 4.75 months of import cover, offering a strong buffer against external shocks.
Meanwhile, private sector credit growth turned positive, reaching 2.0% in May, amid easing lending rates, which dropped to an average of 15.4% from a peak of 17.2% in late 2024. Despite elevated non-performing loans — at 17.6% of gross loans in April — the banking sector remains adequately capitalized and liquid.
