- Kenya’s economy grew faster than expected in the second quarter, driven by construction and falling inflation.
- Government spending on affordable housing and delayed road project payments boosted activity.
- Public debt has risen to 68.8% of the country’s GDP, keeping Kenya at a high risk of debt distress.
The World Bank described Kenya’s second-quarter economic performance as an “upward surprise.” Growth was largely driven by the construction sector, fuelled by government investments in affordable housing and clearing long-delayed contractor payments for road projects. Falling inflation also supported increased activity.
“The second-quarter performance is an upward surprise,” said Jorge Tudela Pye, the World Bank’s country economist for Kenya.
Despite the strong growth figures, deeper concerns about Kenya’s financial stability persist.
Kenya’s public debt now stands at 68.8 percent of GDP. The country remains rated at high risk of debt distress, and revenue collection has fallen short of targets by an average of 6.1 per cent over the past three years. This has kept the fiscal deficit wide and borrowing high.
Much of the borrowing has come from domestic markets, crowding out private credit and keeping interest rates high for households and businesses.
While the economy grows, most new jobs remain informal and poorly paid. Real wages have dropped more than 10 per cent over the last decade, putting pressure on household purchasing power.
“Shoppers are buying only essentials. Baskets are smaller, luxury items are not moving at all,” said Wambui Mbarire, chief executive of the Retail Trade Association of Kenya.
Experts warn that without bold revenue reforms and tighter expenditure controls, fiscal pressures will continue. Kenya also faces risks from climate shocks, global trade disruptions, and political tensions ahead of the 2027 elections.
The World Bank argues that the recent growth provides a rare opportunity for structural change and economic reform.
“The stronger-than-expected base offers a rare window for structural change,” said the World Bank.
