World Bank cuts Kenya's 2025 growth forecast as private sector squeezed
The World Bank has cut Kenya's growth forecast for this year by half a point from its initial prediction to 4.5%, it said on Tuesday, citing high levels of debt, high lending rates and a decline in private sector credit.
Kenya, which is East Africa's biggest economy, has recorded robust annual growth rates, but high public debt, repayments, economic inequalities and questions on governance have curbed its performance.
"Domestic borrowing, coupled with high lending rates, risk crowding out the private sector," Naomi Mathenge, a senior economist at the World Bank, told a briefing on the Kenya Economic Update report, which is usually published twice a year.
The government has used the domestic market to fund its budget due to lower financing from external sources, the report said, while unpaid bills and tax revenue shortfalls have undermined its fiscal consolidation efforts.
Authorities have managed to keep inflation and the foreign exchange rates stable since last year, allowing policymakers to start easing, but real lending rates have not followed, the report said.
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