The World Bank lifted Kenya’s economic growth forecast for this year to almost 5% on Monday, citing a pick up in the construction sector in East Africa’s largest economy.<\/p>\n
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Some of Kenya’s main industries like construction suffered last year, partly as concerns mounted about the government’s finances, but the trend has begun to reverse, the development lender said.<\/p>\n
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“Signs of recovery are emerging,” a new report on Kenya’s economy said, adding that the rebound in construction in the first half of 2025 had offset a slowdown in manufacturing.<\/p>\n
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The result is that the economy is now projected to grow by 4.9% this year, up from the World Bank’s May forecast of 4.5%, and maintain that rate of growth over the next two years.<\/p>\n
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Risks to the outlook stem from international trade uncertainty, including the expiry of a United States trade deal with the region, and ongoing fiscal consolidation that could curb government spending, the report said.<\/p>\n
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Government officials say Kenya’s economic expansion has also been negatively affected by a heavy public debt burden characterised by high annual repayments that have absorbed much of its revenue.<\/p>\n
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The government has turned to measures like loans securitised on a motorists’ road maintenance levy on petrol prices to raise funds to pay road contractors who had abandoned sites last year due to lack of payment.<\/p>\n
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It is also in talks with the International Monetary Fund to secure a new financial support programme. Differences remain, however, including over whether the securitised borrowing should be classified as government debt or not.<\/p>\n
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Monday’s World Bank report laid out a set of reforms the government should carry out to boost competition and support investment and economic growth.<\/p>\n
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Barriers to competition include the presence of more than 200 state owned firms that benefit from undue advantages, distorting competition, and restrictions on foreign investments, it said.<\/p>\n
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“There is significant room to make Kenya’s regulatory framework less restrictive to competition,” the lender said.<\/p>\n
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–Reuters–<\/p>\n
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