Kenyans expect high economic growth in 2025, survey shows

Kenyans have higher expectations for economic growth in the first three months of 2025 than they did for a comparable time in 2024, a survey reveals.

Bank respondents suggested a review of the legal framework in terms of processes of registration of collateral to improve on turnaround time and efficiencies at the lands registry to enhance closure of pending court cases pertaining to loans recovery.

According to the Central Bank Market Perception Survey, almost all sectors of the economy expect growth in 2025. The report reveals that banks, for example, expect to grow by 5.2 per cent, agriculture by 5.2 per cent, manufacturing 5.0 per cent, trade, real estate by 4.9 per cent, transport by 5.4 per cent, tourism by 5.5 per cent and non-banks by 5.1 per cent.

The report reveals that in the next three months, the respondents expected improved economic activity. It indicates reduced cost of borrowing, favourable weather, a stable macroeconomic environment would be the drivers moderate to strong, and very strong economic activities in the next three months.

The same sentiments were echoed by 93 per cent non-bank and 97 per cent bank respondents. “Respondents expected the reduction of lending rates by banks following Central Bank’s easing of monetary policy to stimulate private sector credit and lead to recovery of household and services sector spending, and increased imports and thereby impact economic activity,” the report indicates.

In addition, the respondents expect an increase in activities around food production by households, and manufacturers who supply inputs and fertilizers. They also expect a stable economic environment including low inflation, a stable exchange rate, and lower interest rates to support economic activity in the next three months.

However, what raised concern with respondents was the effects of taxation on disposable incomes, and reduced aggregate demand as the government implements austerity measures.

On credit, the respondents intimated that the private sector would have credit growth in 2025 largely due to expected lowering of lending rates.

The respondents said the easing of monetary policy, would trigger low interest rates, which will also results into a stable macroeconomic environment characterized by a low and stable inflation, and improving global economic outlook. All these are expected to provide a conducive environment for investments, hence private sector credit growth.

“Respondents also expected increased demand for credit, especially short-term borrowing, borrowing to reduce financial constraints in businesses, and borrowing for funding capital requirements, to contribute to increased private sector credit growth,” he said.

On employment, banks largely expect to hire more in 2025 supported by continued branch expansion and growth in business launch of new products, and to replace existing staff.

On the other hand, the non-bank players had mixed expectations about hiring in 2025 saying their hiring were largely influenced by the need to reduce costs, improve efficiency and to increase profits by reducing overheads.

The report said that many respondents expect the country to have a predictable tax environment to enable the businesses to thrive, and make planning easier. They also suggested that the government give targeted tax breaks for Small Medium Enterprises (SMEs) and sectors driving economic growth, such as agriculture and manufacturing.

The report revealed that there is a need to adopt policies to spur credit growth including credit risk guarantee schemes to encourage private sector credit growth by banks and enable them to focus on Micro Small And Medium Enterprise (MSMEs) and other risky segments with high non-performing loans (NPLs).

“In addition, respondents urged the government to reduce public borrowing to avoid crowding out the private sector,” the report reveals.