Deadly Riots Drag Kenya Economy to Slowest Pace Since Pandemic

Declining interest rates will lift Kenyan growth this year, after the economy expanded at the slowest pace in 2024 since the coronavirus pandemic, Finance Minister John Mbadi said.

Gross domestic product is likely to increase 5.4% this year, Mbadi said at a briefing in the capital, Nairobi. That compares with a growth rate of 4.7% in 2024 — the lowest since a 0.3% contraction in 2020 — data released by the Kenya National Bureau of Statistics on Tuesday showed.

“Anticipated declines in interest rates are expected to make private sector credit grow, boost economic activity and accelerate overall economic growth,” the minister said. The Kenyan central bank has slashed its benchmark rate by 300 basis points to 10% in an easing cycle that started in August.

Growth in East Africa’s biggest economy was crimped by anti-government protests that left at least 60 people dead last year, when citizens marched against plans to impose taxes on goods ranging from bread to diapers. The levies were aimed at increasing revenue to meet International Monetary Fund program targets.

President William Ruto’s administration later scrapped a final review of the four-year plan and forfeited $850 million in budget support as it was unable to meet some of the IMF criteria. The government is now seeking a new program.

Growth was also hobbled by floods that left hundreds of people dead, damaged infrastructure, destroyed farms and led to the death of livestock. Growth in agriculture, which accounts for 22.5% of total output and employs more than 70% of rural people, slowed to 4.4% from 7.1% in 2023.

The outcome for 2024 would have been even worse had growth not picked up in the fourth quarter. The economy expanded 5.1%, compared with revised growth of 4.2% in the prior three-month period.

Still, growth in 2025 will be tested by US President Donald Trump’s tariff war. The levies have upended markets and led the IMF to lower its 2025 forecast for global growth to 2.8% and Kenya’s to 4.8% from earlier projections of 3.3% and 5% respectively.

Planned spending cuts in the fiscal year starting July 1 may also weigh on Kenya’s growth in 2025.

“We have revised the total expenditure to just about 4.2 trillion shillings ($32.5 billion), all the way from above 4.3 trillion” shillings, said Mbadi. “This is not to hurt anyone or to punish anybody, but just to be realistic and live within our means.”

This article was originally published by Bloomberg