World Bank cuts Kenya’s 2025 growth forecast as private sector squeezed

Kenya’s Growth Forecast Cut Amid Private Sector Strain
The World Bank has reduced Kenya’s projected economic growth for 2025 to around 4.5 percent, citing a significant squeeze on the country’s private sector driven by high borrowing costs and mounting debt pressures.
Kenya, East Africa’s largest economy, has grappled with rising public-debt levels (now about 65.5% of GDP) and a domestic borrowing push that is crowding out private-sector investment.
The bank’s report noted that real lending rates remain elevated, even as inflation and foreign-exchange pressures have eased, and credit growth to sectors like manufacturing, finance and mining has turned negative.
The reaction from analysts and government officials has been mixed. While some view the adjustment as a call-to-action for Kenya to deepen structural reforms and improve tax revenue collection, others caution that if private‐sector credit continues to shrink and debt growth remains unchecked, the country could face heightened risk of economic distress.
Looking ahead, Kenya’s ability to return to stronger growth of around 5 percent in the next two years hinges on a successful overhaul of tax exemptions, better fiscal consolidation and a recovery in private credit.
If these conditions are met, the forecast outlook may improve; if not, the odds of longer-term sluggish growth or even external financing pressures could increase.