The Central Bank of Kenya (CBK) is expected to keep on easing, with projections showing the benchmark rate going down to 9% by end 2025. According to Absa Research’s Kenya Economic Overview this will be maintained through 2027 from the current 10.75%.

Inflation is expected to remain stable at 4.5% by December 2025. However, food inflation remains a key risk. The Kenyan economy is expected to grow 4.9% in 2025 up from 4.5% in 2024 driven by stable consumer spending.

Since August 2024 the CBK has cut the Central Bank Rate by 225 basis points from a peak of 13%. The ongoing rate cuts are in line with the policy objectives of reducing high lending rates and supporting credit growth.

Earlier in January Fitch Solutions projected an even lower benchmark rate of 8.25% by 2025 citing policymakers’ concerns over slow credit growth and high borrowing costs. With inflation expected to remain low there is room for further easing.

According to the Absa Research report we are returning to pre-pandemic economic trends driven by robust consumer spending and improving financial conditions. Consumer spending has been the key driver of Kenya’s economic growth, contributing an average of 3.8 percentage points to GDP growth over the past decade. Government spending and investment have also played a role, contributing 0.6 and 1.2 percentage points respectively.

However, net exports have been a drag on growth reducing GDP by about 0.6 percentage points annually. Kenya’s low savings rate currently under 5% of GDP is a long-term challenge. Foreign income transfers have provided some relief but the country’s weak domestic savings remains a structural problem.

The agricultural sector which is a key part of Kenya’s economy is facing headwinds. The impact of La Niña in the first quarter of 2025 will disrupt supply chains and further constrain sectoral growth. However, foreign exchange reserves are strong enough to cover almost 5 months of imports. The shilling is expected to stabilise within the KES 130-140 per US dollar range.All in all a positive outlook for the Kenyan economy with policy easing supporting stability and growth but structural issues of low savings and external imbalances remain a problem.