NAIROBI, May 27 (Xinhua) -- The World Bank on Tuesday cut Kenya's 2025 economic growth projection to 4.5 percent from an earlier forecast of about 5 percent, citing higher debt risks and declining private sector credit.
In its Kenya Economic Update report released in Nairobi, the capital of Kenya, the global lender said it revised the projection downward by 0.4 percentage points from the December 2024 forecast, amid interest rates that remain above historical averages.
The World Bank noted that credit to the private sector has continued to fall, driven by higher interest rates, weakening demand, and the effects of exchange-rate valuation.
"Kenya's public debt remains at high risk of distress, with interest payments absorbing about a third of tax revenue. Reforms to strengthen fiscal sustainability in an equitable way while promoting inclusive growth and jobs are critical to revive a slowing economy and a weak labor market," the bank said.
It added that Kenya's real gross domestic product is expected to pick up gradually in the medium term, with growth projected to rise to about 5 percent between 2026 and 2027.
According to the update, which is published twice a year, some of the country's macroeconomic indicators have improved since 2024, including declining inflation, a stabilized exchange rate, and stronger international reserves, but the overall pace of economic growth has slowed.
The economic slowdown stems from multiple challenges, including floods, high interest rates, and subdued business sentiment following protests and reduced development spending, the World Bank said.
"Despite improvements in Kenya's macroeconomic indicators, the country continues to face structural challenges, including insufficient job creation and low wages, especially among the youth," said Qimiao Fan, the World Bank country director for Kenya, Rwanda, Somalia, and Uganda. ■
