The World Bank has upgraded Kenya’s growth forecast for 2025 to 4.9 percent, up from its May estimate of 4.5 percent, after the economy staged an unexpectedly strong rebound in the second quarter.
Construction led the recovery, fuelled by government spending on affordable housing and the clearing of billions of shillings in long-delayed contractor payments for road projects. Falling inflation also helped lift activity.
Jorge Tudela Pye, the World Bank’s country economist for Kenya, described the second-quarter performance as an “upward surprise”. Yet the brighter headline figure has done little to ease deeper anxieties about the country’s finances.
Public debt now stands at 68.8 percent of GDP, with Kenya still rated at high risk of debt distress. Revenue collection has undershot targets by an average of 6.1 percent over the past three years, leaving the fiscal deficit stubbornly wide.
Much of the borrowing has come from domestic markets, crowding out private credit and keeping interest rates painfully high for businesses and households.
The labour market tells an equally sobering story. Most new jobs are informal and poorly paid, while real wages have fallen more than 10 percent over the past decade.
Wambui Mbarire, chief executive of the Retail Trade Association of Kenya, says shoppers are buying only essentials. “Baskets are smaller, luxury items are not moving at all,” she said.
Analysts warn that without bolder revenue reforms and tighter expenditure controls, fiscal pressures will persist. Climate shocks, global trade disruptions and political tensions ahead of the 2027 elections remain potent risks.
The World Bank argues that the stronger-than-expected base offers a rare window for structural change.
