Kenya's economic growth is expected to slow down in 2024, with GDP projected to grow at 4.7%, a decrease from 5.6% in 2023, according to the latest Kenya Economic Update released today. This rate aligns closely with the country's pre-pandemic average of 4.6% per year between 2011 and 2019. The report indicates that while there is potential for gradual improvement in real GDP over the medium term, structural imbalances are obstructing faster and more inclusive growth.
The agricultural and services sectors, though resilient, are experiencing a slowdown with risks of further deceleration. This trend has been influenced by factors such as a tighter macroeconomic policy framework and declining business confidence even before the protests in June. Additionally, the April 2024 floods significantly impacted urban households' livelihoods, limiting private consumption growth. The industry sector also faces challenges, particularly in construction due to high interest rates affecting housing demand.
"A slowdown in economic growth would negatively affect job creation and poverty reduction," stated Qimiao Fan, World Bank Country Director for Kenya, Rwanda, Somalia, and Uganda. "We remain strongly committed to supporting the people and Government of Kenya to improve the economic environment and create more and better jobs."
The update emphasizes that accelerating structural reforms is crucial given Kenya's fiscal constraints. External borrowing opportunities are limited while domestic government borrowing has increased interest rates, crowding out private sector borrowing. Despite a projected primary surplus for FY24/25, higher interest payments maintain elevated net financing needs.
To address its high risk of debt distress, fiscal consolidation remains essential for Kenya but must be equitable. It requires efficient expenditures that support service delivery while protecting vulnerable populations.
"While the fiscal deficit remains high, its steady decline offers a key opportunity to further reduce debt vulnerabilities through strategic revenue mobilization, fiscal discipline, and growth-oriented policies," said Naomi Mathenge, World Bank Senior Economist.
The report highlights the importance of including all Kenyans in economic activities through women's empowerment as a means to alleviate socioeconomic pressures. Empowering women can enhance productivity and foster inclusive growth by enabling them to participate actively in income-generating activities.