Kenya’s central bank has revised its outlook for economic growth in 2025, projecting a modest uptick to 5.6%, up slightly from the 5.4% expected this year. At first glance, this sounds like a positive turn. But in a region where economic potential often outpaces real performance, the numbers alone tell only part of the story.
What matters more is the broader context — the pressures the economy is facing, the levers being pulled to stimulate activity, and what this growth rate truly means for businesses, consumers, and investors navigating Kenya’s evolving landscape.
Announcing the projections at a press briefing in Nairobi, Central Bank Governor Kamau Thugge pointed to a few bright spots driving the improved outlook: the continued resilience of key service sectors, a rebound in agricultural productivity, and an expected recovery in credit to the private sector. He also highlighted gains in export performance, boosted by global demand and competitive positioning in markets like tea, horticulture, and tech-enabled services.
Kenya’s diversified service sector — spanning tourism, financial services, ICT, and retail — has long been a steady engine of growth. And with agriculture rebounding from drought conditions and erratic weather in recent years, the twin engines of rural demand and food supply stability are beginning to rev up again.
But behind this cautious optimism lies a deeper question: is a projected 5.6% growth rate enough to meaningfully transform livelihoods and reduce economic pressures in a country of over 55 million people?
Private Sector Credit Is Moving, But Slowly
A key assumption underpinning the CBK’s projection is a rebound in credit to the private sector. After a period of high interest rates and tight liquidity, the monetary policy stance is beginning to loosen. In fact, the central bank has now cut its benchmark lending rate for the fifth straight meeting, signaling a commitment to stimulating demand.
This is welcome news for businesses — particularly SMEs — who have struggled under the weight of expensive borrowing and limited access to capital. However, the effectiveness of rate cuts depends not just on policy, but on confidence. Lenders must be willing to take risk, and borrowers must see opportunity worth financing. It’s a delicate dance — and right now, the rhythm is still uneven.
Credit may be picking up, but not fast enough to power the kind of private sector-led expansion Kenya needs. Structural bottlenecks — from regulatory red tape to payment inefficiencies and policy unpredictability — continue to dampen entrepreneurial momentum.
External Risks Cloud the Horizon
The Central Bank Governor, Thugge was right to flag the “external and domestic risks” that could derail the growth trajectory. Chief among them are geopolitical conflicts and global trade tensions. As global economies retrench and nationalism shapes trade policy, particularly in the U.S., Europe, and China, Kenya’s position as a mid-sized exporter in a global system becomes more precarious.
Meanwhile, shocks in global commodity markets, such as rising oil prices or disruptions in fertilizer supply chains, can quickly eat into Kenya’s import bill and fuel inflation. Add in the local factors — rising debt servicing costs, climate variability, and political pressure around the 2027 election cycle — and the margin for error becomes very thin.
What the CBK forecast tells us is that the foundation is stabilizing. What it does not tell us is whether the country is doing enough to move from recovery to true growth.
For businesses and investors, this moment calls for measured optimism. The signs of recovery are real — but so are the risks. Navigating this space will require agility, a keen eye on both domestic and global shifts, and a strong understanding of Kenya’s fast-evolving consumer and enterprise dynamics.
