Kenya’s GDP is expected to grow at 4.9 percent in 2025, characterized by sectoral rotation from agriculture to construction and financial services. This is according to the latest stats contained in Absa Bank Kenya’s macro economic outlook.
According to the outlook, Kenya’s inflation is expected to average 4.5 percent this year with restrained core inflation, which has been stable around 2 percent since July 2024, while the upward pressure from food prices is expected to ease as the impact of light La Nina eases off after quarter one.
At the same time, the Central Bank of Kenya is expected to cut the Central Bank Rate down to 9 percent by the third quarter of the year and leave it unchanged for the remainder of this year. This is expected to lower the cost of borrowing and boost private sector credit expenditure.
The contribution of agriculture to Kenya’s GDP growth has been falling over the last year and is expected to take a hit from the La Nina phenomena. The weather phenomena is characterized as weak and its impact on food prices may peak in the first quarter this year when it is projected to be at its most intense.
The construction sector had stagnated after peaking in 2022. The sector is, however, now picking up and has shown recovery over the last few months.
The financial services sector had taken a hit when the Central Bank of Kenya raised interest rates. Now, monetary policy has shifted after CBK cut rates consistently since August last year, signaling lower borrowing costs and recovery in the private sector credit.
The Kenya shilling is expected to remain stable, backed by international financial inflows that have boosted foreign exchange reserves to near-record levels. Kenya’s comfortable forex reserves and access to international financing, including foreign portfolio inflows to the local bond market, multilateral loans from the World Bank and International Monetary Fund, bilateral loans, and the Eurobond market continue to ward off volatility and have bolstered investor confidence.
“At Absa, we are deeply invested in your story because it truly matters to us. As a collective, we have an ambition to be a financial services group that Africa can be proud of. We are committed to the growth of this continent and the prosperity of our people, and we believe that bringing these kinds of insights is our contribution to the reforms and policy discussions that need to take place in our continent,” said Absa Bank Kenya PLC CEO and MD Mr. Abdi Mohamed.
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