Nairobi, June 5, 2024 — Kenya’s real GDP growth accelerated to 5.6% in 2023, surpassing the previous year’s growth of 4.9%. However, GDP growth in 2024 is expected to slow down to 5.0%, according to the latest Kenya Economic Update (KEU) launched today. The report attributes the 2023 growth to the recovery of the agriculture sector following improved weather conditions and significant contributions from tourism and financial services within the services sector.
The 29th edition of the Kenya Economic Update: Fostering Trade for Robust Growth and Dynamic Job Creation outlines several challenges that framed Kenya’s macroeconomic performance in 2023. These include tight fiscal and monetary policies, elevated inflation, rising debt service obligations, high borrowing costs constraining access to global capital markets, and a sharp depreciation of the shilling. Despite these obstacles, Kenya's economic growth demonstrated resilience due to strategic government policy measures aimed at bolstering overall macroeconomic stability.
“In a decisive move to stabilize the macroeconomic environment, the Government of Kenya successfully conducted a partial buyback of the Eurobond in February 2024, a move that significantly eased the immediate liquidity constraints for the year, instilling a sense of calm in the markets,” said Keith Hansen, World Bank Country Director for Kenya. “The improved macroeconomic conditions and re-access to international financial markets are anticipated to boost investor confidence and private investment.”
The KEU projects an average GDP growth of 5.2% during 2024-26. This projection is underpinned by favorable weather conditions for agriculture, recovery in industry, and resilience in services. The outlook assumes adequate rainfall, continued fiscal consolidation by the government, and ongoing implementation of structural reforms. The report anticipates that the private sector will play a stronger role in Kenya’s medium-term recovery.
Kenya’s efforts in trade integration could significantly contribute to substantial economic growth and job creation, notes KEU with its special focus on trade integration's role in promoting economic growth and job creation. Trade patterns indicate that agriculture is currently the largest contributor to Kenya’s exports followed by minerals and chemicals; however, exports have underperformed recently with limited product diversification leading to loss of competitiveness.
The report highlights that Kenya is proactively utilizing all channels at global, continental, and regional levels to enhance its role in global economy and increase regional and international trade integration with aspirations extending beyond export growth into job creation opportunities.
“Even though the export-to-GDP ratio has been declining, the potential for export expansion remains significant,” said Naomi Mathenge, World Bank Senior Economist for Kenya. “Targeted policy considerations are crucial to fully capitalize on economic growth and robust job creation from trade integration.”
Policy recommendations include revising trade and investment policies towards fostering export orientation; ensuring policy coherence; strengthening institutions; enhancing strategic skills development; providing multifaceted support for export orientation; attracting more Foreign Direct Investment as leverage for optimizing trade integration; and mitigating trade- and climate-related vulnerabilities especially concerning agricultural exports.
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