Nairobi, June 5, 2024 — Kenya’s real GDP growth accelerated to 5.6% in 2023, surpassing the previous year’s growth of 4.9%. However, GDP growth in 2024 is expected to slow down to 5.0%. This is according to the latest Kenya Economic Update (KEU) launched today, which adds that the 2023 growth was driven by the recovery of the agriculture sector, following improved weather conditions, and the services sector, with tourism and financial services contributing the most.
According to the 29th edition of the Kenya Economic Update: Fostering Trade for Robust Growth and Dynamic Job Creation, tight fiscal and monetary policies, elevated inflation, rising debt service obligations, high borrowing costs that constrained access to global capital markets, and the sharp depreciation of the shilling, framed Kenya’s macroeconomic performance in 2023. Despite this challenging environment, Kenya's economic growth demonstrated resilience and accelerated, driven by the government’s strategic policy measures that have bolstered overall macroeconomic stability.
“In a decisive move to stabilize the macroeconomic environment, the Government of Kenya successfully conducted a partial buyback of the Eurobond in February 2024, a move that significantly eased the immediate liquidity constraints for the year, instilling a sense of calm in the markets,” said Keith Hansen, World Bank Country Director for Kenya. “The improved macroeconomic conditions, and re-access to international financial markets, are anticipated to boost investor confidence and private investment.”
The KEU projects a GDP growth of 5.2% on average during 2024-26, underpinned by favorable weather conditions for the agricultural sector, a recovery of industry, and the resilience of services. The outlook assumes adequate rainfall, government staying on the fiscal consolidation path, and the continuous implementation of the government’s structural reform agenda. The report projects that the private sector will play a stronger role in Kenya’s medium-term recovery.
Kenya’s efforts in trade integration could significantly contribute to substantial economic growth and job creation, notes the KEU whose special focus is on the role of trade integration in promoting economic growth and job creation. Trade patterns shows that agriculture is the largest contributor to Kenya’s exports, followed by minerals and chemicals. Kenya’s exports, however, have significantly underperformed. Also, the country has not diversified its products in the past few years and has lost competitiveness in the markets to which is has been exporting.
The report notes that Kenya is proactively utilizing all channels on the global, continental, and regional level to enhance its role in the global economy and increase regional and international trade integration. Its aspirations extend beyond export growth, aiming to convert this growth into job opportunities.
“Even though the export-to-GDP ratio has been declining, the potential for export expansion remains significant,” said Naomi Mathenge, World Bank Senior Economist for Kenya. “Targeted policy considerations are crucial to fully capitalize on economic growth and robust job creation from trade integration.”
Some of these policy considerations include revising trade and investment policies to foster export orientation, cementing policy coherence and predictability, strengthening institutions, enhancing strategic skills development, multifaceted support to export orientation and, drawing in more Foreign Direct Investment as a lever for optimizing the role of trade integration. The country will need to also mitigate trade and climate related vulnerabilities, especially for agricultural exports.
