The Central Bank of Kenya (CBK) has revised the projected growth of Kenya’s economy in 2025 downwards. CBK Governor Dr. Kamau Thugge said the Monetary Policy Committee (MPC) observed that the performance of the Kenyan economy slowed down in 2024.
Thugge said real GDP grew by 4.7 per cent compared to 5.7 per cent in 2023, mainly reflecting deceleration in growth in most sectors of the economy.
He stated that the leading indicators of economic activity point to improved performance in the first quarter of 2025.
However, the Governor revealed that the projected growth of the economy in 2025 has been revised from 5.4 per cent to 5.2 per cent.
“The projected growth of the economy in 2025 has been revised to 5.2 per cent from 5.4 per cent, on account of higher trade tariffs,” Thugge said.
Thugge said the projection was reduced by 0.2 per cent, taking into account what has happened in the United States (U.S), European Union (EU) and the United Kingdom (UK).
He explained that Kenya gets most of its remittances from the three regions, with the U.S having 55 per cent.
“We thought that would have a negative impact on our economy because we get most of our remittances from those sources. 55 per cent of the remittances come from the U.S, therefore any impact on its economy will have a negative impact on the economy,” he said.
He stated that Kenya’s horticultural exports to the EU could be affected by the slowdown in EU growth.
Additionally, Thugge said the UK slowdown could also impact the country through reduced remittances and tourism.
“That is why we felt it necessary to revise our growth projection downwards if the tariffs are sustained. If they are not sustained, we could go back to our growth of 5.4 per cent,” he said.
He pointed out that the resilience of key service sectors and agriculture, the expected recovery in growth of credit to the private sector, and improved exports are expected to support the pickup of growth in 2025.
CBK Update on Global Growth
Similarly, Thugge said the global growth outlook for 2025 has been revised downwards.
This is mainly on account of higher tariffs, heightened uncertainty, weak global demand, and elevated geopolitical risks.
He stated that Kenya’s real GDP growth is expected to remain above the global, Sub-Saharan Africa (SSA), and emerging market and developing economies averages in 2025 and 2026.
“Global financial conditions have been volatile, mainly reflecting elevated trade policy uncertainties, and weak global growth due to trade policy uncertainties,” he said.
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Lowering CBR Rate
MPC also lowered the Central Bank Rate (CBR) by 25 basis points to 9.75 percent from 10.00 percent during its Meeting on June 10, 2025.
Thugge said Central banks in the major economies have continued to lower their interest rates, but at a more cautious pace, depending on inflation and economic growth expectations.
He explained that average lending rates in the domestic market have continued to decline, while private sector credit growth has recovered modestly.
Thugge said the MPC observed that overall inflation was expected to remain below the midpoint of the 5±2.5 percent target range in the near term.
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This is supported by stability in food and energy prices and continued exchange rate stability.
“There was scope for a further easing of the monetary policy stance to augment the previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity, while ensuring inflationary expectations remain firmly anchored, and the exchange rate remains stable,” Thugge said.
He stated that the MPC will closely monitor the impact of this policy decision as well as developments in the global and domestic economy and stand ready to take further action as necessary in line with its mandate.
The Committee will meet again in August 2025.
Inflation
Kenya’s inflation declined to 3.8 per cent in May from 4.1 per cent in April
Global headline inflation is projected to decline at a slower pace due to the expected inflationary impact of higher tariffs on trade.
The Governor said Central banks in major economies have adopted a more cautious approach in lowering policy rates.
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CBK outlook for global inflation rates. PHOTO/CBK.
