As the world navigates a complex economic landscape, Kenya’s economy is poised for resilience in 2025, according to the recently released Economic Survey 2025.
The report, detailing global and domestic economic performance in 2024 and projections for the coming year, paints a picture of cautious optimism for Kenya.
With a robust services sector, revitalised agricultural productivity, and strategic government interventions, the country is well-positioned to weather global uncertainties while addressing domestic challenges.
However, structural issues, including a persistent budget deficit and uneven sectoral growth, remain hurdles to sustained prosperity.
The global economy demonstrated resilience in 2024, achieving a real GDP growth of 3.2 per cent, a slight dip from 3.3 per cent in 2023. This stability persisted despite challenges like high energy and food prices and tighter monetary policies.
Kenya’s 2024 Performance: A Mixed Bag
Kenya’s economy grew by 4.7 per cent in 2024, a slowdown from the revised 5.7 per cent in 2023. While most sectors contributed to this growth, agriculture, forestry, and fishing—key pillars of the economy—saw a moderated expansion of 4.6 per cent, down from 6.6 per cent in 2023.
The services sector shone brightly, with financial and insurance activities growing by 7.6 per cent, transportation and storage by 4.4 per cent, and real estate by 5.3 per cent.
However, the construction sector contracted by 0.7 per cent – despite the ongoing Affordable Housing Programme – , and mining and quarrying saw a significant 9.2 per cent decline, driven by reduced production of key minerals like titanium and gemstones.
Nominal GDP rose from Sh15.03 trillion in 2023 to Sh16.22 trillion in 2024, with agriculture contributing 22.5 per cent and services accounting for 61.1 per cent.
GDP per capita increased to Sh309,460, reflecting modest gains in living standards. Inflation eased to a five-year low of 4.5 per cent from 7.7 per cent in 2023, driven by lower food prices due to favourable weather conditions.
Notably, the food and non-alcoholic beverages inflation rate dropped to 5.6 per cent from 9.7 per cent, with sugar and maize prices declining significantly.
Employment grew slower than in 2023, with 782,300 new jobs created in 2024, 90 per cent of which were in the informal sector. The modern sector added 78,600 jobs, while the informal sector contributed 703,700.
Employment in the modern and informal sectors, excluding small-scale agriculture, went up from 20.0 million in 2023 to 20.8 million in 2024.
However, real average earnings per employee slightly declined, signalling persistent cost-of-living pressures for workers.In the private sector, wage employment registered a growth of 2.1 per cent in 2024 compared to 3.3 per cent in 2023.
The leading industries in the private sector in 2024 providing the highest employment numbers were Manufacturing; and Agriculture, Forestry and Fishing, accounting for 15.9 per cent and 14.1 per cent, respectively. In the public sector, wage employment registered a growth of 3.1 per cent in 2024 compared to 5.9 per cent in 2023.
Sectoral Highlights: Strengths and Challenges
- Agriculture: The sector showed resilience, with agriculture value added rising to Sh 1.7 trillion. Sugar cane production surged by 68.7 per cent, and tea and milk output increased, but maize production fell by 6.1 per cent due to erratic rainfall. Horticultural exports declined by 14.1 per cent, highlighting vulnerabilities in global market access.
- Manufacturing: The sector grew by 2.8 per cent, driven by a 72.5 per cent rebound in sugar production. However, cement production and consumption fell, reflecting a slowdown in construction activity. Investment in Export Processing Zones (EPZs) rose by 15 per cent, signalling potential for export-led growth.
- Tourism: International visitor arrivals jumped by 14.7 per cent to 2,394,400, boosting hotel occupancy and conference activity. This growth underscores Kenya’s appeal as a global tourism destination, supported by strategic marketing and infrastructure improvements.
- ICT: The ICT sector expanded by 8.3 per cent, with mobile subscriptions rising to 71.4 million and internet subscriptions reaching 57.8 million. However, a near-doubling of online crimes to 3.5 billion highlights the need for stronger cybersecurity measures.
- Energy: Renewable energy sources dominated electricity generation, contributing 91.1 per cent of the total. Hydro generation surged by 36.2 per cent due to favourable rainfall, but global crude oil price declines and a stronger Kenyan shilling reduced the petroleum import bill by 8.1 per cent.
- Public Finance: National government revenue is projected to grow by 13.4 per cent to Sh 3.11 trillion in 2024/25, but a budget deficit of Sh862.7 billion and rising debt interest payments (Sh995.8 billion) underscore fiscal pressures. County revenues are expected to rise modestly to Sh521.8 billion.
2025 Outlook: Optimism with Caveats
Kenya’s economy is projected to remain resilient in 2025, driven by a strong services sector, enhanced agricultural productivity, and government initiatives like subsidised fertilisers and seeds.
The Bottom-Up Economic Transformation Agenda—focusing on Agriculture, Micro, Small and Medium Enterprises (MSME), Housing and Settlement, Healthcare, and the Digital Superhighway and Creative Economy aims to lower living costs, eradicate hunger, and boost exports.
Inflation is expected to stay within the 2.5–7.5 per cent target range, supported by low food and energy prices and a stable exchange rate. Declining interest rates are anticipated to spur private sector credit and economic activity.
However, challenges loom. The budget deficit and rising debt burden require careful fiscal management. Uneven sectoral growth, particularly in construction and mining, and vulnerabilities in agricultural exports highlight the need for diversification. Additionally, global uncertainties, including geopolitical tensions and trade policy shifts, could impact Kenya’s export markets.
Kenya’s economic trajectory in 2025 hinges on its ability to leverage its strengths—vibrant services, resilient agriculture, and growing tourism—while addressing structural weaknesses.
The government’s focus on inclusive growth through affirmative action funds and social protection programs is commendable, but fiscal discipline and strategic investments in infrastructure and technology will be critical.
As the global economy stabilises, Kenya has an opportunity to solidify its position as a regional economic powerhouse, provided it navigates domestic and international challenges with prudence and foresight.
