The World Bank’s Kenya Economic Update,highlights a cautiously optimistic outlook for the country’s economy amid a modest improvement in the global economic environment in 2024. Global trade has rebounded and inflationary pressures have eased, contributing to improved macroeconomic indicators. Kenya, however, continues to experience a slowdown in growth, with real GDP projected to pick up gradually over the medium term. External factors, including rising financial inflows and recovering exports, have supported the economy, while a tighter monetary policy and moderated global inflation have helped bring domestic inflation down. Despite these gains, Kenya faces persistent fiscal policy challenges, including increased domestic borrowing, which risks crowding out private sector lending and constraining economic stability.
The update underscores the need for a more efficient and equitable fiscal policy to address Kenya’s narrowing fiscal space, growing demand for investment in essential services, and limited inclusivity in economic growth. In particular, expanding the coverage and adequacy of cash transfers is highlighted as a critical measure to strengthen the poverty- and inequality-reducing impact of government spending. The report also points to several downside risks that could undermine the economic outlook, including adverse weather conditions, fiscal pressures, and external shocks that could affect trade and investment flows. Managing these risks effectively is central to ensuring sustainable and resilient economic growth.
Looking ahead, the report projects that Kenya’s external sector will remain relatively stable, and with careful policy calibration, the country can achieve gradual economic recovery. Key priorities include strengthening fiscal management, improving public investment efficiency, and fostering private sector growth to generate employment opportunities. The update emphasizes that while macroeconomic indicators show some improvement, translating these gains into inclusive growth and improved livelihoods for all Kenyans requires concerted policy action. A balanced approach addressing both fiscal prudence and social equity will be essential for Kenya to maintain stability, sustain growth, and navigate emerging domestic and global challenges.