FX.co ★ World Bank Cuts Kenya's 2025 Growth Forecast to 4.5%

The World Bank has adjusted its forecast for Kenya's GDP growth to 4.5% for this year, a decrease of half a percentage point. This revision is attributed to the country's high levels of debt, elevated lending rates, and a reduction in private sector credit. Although inflation and foreign exchange rates have been stable since last year, allowing policymakers to consider easing monetary policy, real lending rates have not adjusted accordingly. This discrepancy has resulted in a deceleration of credit growth, particularly affecting critical sectors such as manufacturing, finance, and mining. Notably, in December 2024, private sector credit experienced a meager growth of just 1.4%, a significant drop from the 13.9% recorded in the same period the previous year. Additionally, Kenya's debt has risen to 65.6% of GDP, categorizing the nation as high-risk for financial distress. Last year, the economy expanded by 4.7%, a decline from the 5.7% growth seen the prior year. However, the World Bank anticipates a recovery in GDP growth to approximately 5% over the coming two years.