Kenya’s GDP to grow at 4.9 percent in 2025, Absa Bank analyst predicts

Kenya’s GDP is expected to grow at 4.9 percent in 2025, characterised by sectoral rotation from agriculture to construction and financial services, according to Absa Bank Senior Economist Phumelele Mbiyo.

At the same time, Mbiyo predicts that inflation will average 4.5 percent this year with restrained core inflation, which has been stable around 2 per cent since July 2024, while the upward pressure from food prices is expected to ease as the impact of light La Nina eases off after quarter one.

Giving a macroanalysis during Absa Bank Kenya’s week-long 2025 Economic forum, he also said he expects the Central Bank of Kenya to cut the Central Bank Rate down to nine per cent by the third quarter of the year and leave it unchanged for the remainder of this year.

“This is expected to lower the cost of borrowing and boost private sector credit expenditure,” said Mbiyo.

On sector contributions, he noted that its share of Kenya’s GDP growth has been falling over the last year and is expected to take a hit from the La Nina phenomena, adding that the weather phenomena is characterised as weak and its impact on food prices may peak in the first quarter this year when it is projected to be at its most intense.

The construction sector, which had stagnated after peaking in 2022, is now picking up and has shown recovery over the last few months.

“The financial services sector had taken a hit when the Central Bank of Kenya raised interest rates. Now, monetary policy has shifted after CBK cut rates consistently since August last year, signaling lower borrowing costs and recovery in the private sector credit,” he added.

On the forex market, he said the Kenya shilling is expected to remain stable, backed by international financial inflows that have boosted foreign exchange reserves to near-record levels.

“Kenya’s comfortable forex reserves and access to international financing, including foreign portfolio inflows to the local bond market, multilateral loans from the World Bank and International Monetary Fund, bilateral loans, and the Eurobond market continue to ward off volatility and have bolstered investor confidence.”

The forum gave bank analysts, financial institutions (both banking and non-banking ones) , importers, exporters, regulators and market investors an opportunity to unpack complex financial instruments that can be crucial in navigating current volatility, while exploring alternative funding opportunities as well yield enhancement instruments as we enter a low-interest rate environment.

Speaking during the forums, Absa Bank Kenya PLC CEO and MD Abdi Mohamed said: “At Absa, we are deeply invested in your story because it truly matters to us. As a collective, we have an ambition to be a financial services group that Africa can be proud of. We are committed to the growth of this continent and the prosperity of our people, and we believe that bringing these kinds of insights is our contribution to the reforms and policy discussions that need to take place in our continent.”