By: ThinkBusiness Africa
The World Bank has issued a new wave of optimism for the Kenyan economy, revising its growth forecast for the current year (2025) upwards to 4.9%. This projection, a notable increase from the earlier May estimate of 4.5%, is primarily attributed to a significant rebound in the construction sector in East Africa’s largest economy.
In its latest Kenya Economic Update report World Bank said on Monday that “signs of recovery are emerging” across key economic pillars.
For much of the previous year, key sectors like construction were hampered by growing domestic concerns, particularly surrounding the government’s fiscal health and public debt management. However, the World Bank’s report indicates a decisive reversal of this trend in the first half of 2025.
The construction sector’s renewed growth played a crucial “offsetting” role, absorbing the slack created by a concurrent slowdown observed in the manufacturing industry. This suggests that public and private infrastructure spending, which had slowed down, is regaining momentum.
The World Bank forecasts that the robust 4.9% growth rate will be sustained over the next two years, offering a stable medium-term outlook for the nation.
While the overall outlook is positive, the World Bank report was careful to highlight ongoing vulnerabilities that could pose downside risks to the forecast.
International trade uncertainty remains a significant external risk, including the upcoming expiration of a key U.S. trade agreement with the region, which could impact Kenya’s export volumes.
The persistent slowdown in manufacturing needs to be addressed through targeted policy action to ensure the economy’s recovery is broad-based and not overly reliant on one sector.
Kenyan government officials have previously acknowledged the weight of a heavy public debt burden, which has diverted substantial annual revenue toward repayments. The rebound in the high-impact construction sector is therefore a welcome sign that the private sector is regaining confidence despite these fiscal pressures.
The construction sector has demonstrated a notable rebound in 2025, contributing KES 149.4 Billion ($1.15 Billion) to the country’s Gross Domestic Product (GDP) in the first quarter of 2025
More significantly, the sector’s growth rate reversed its previous trend, recording a +3.0% expansion in Q1 2025, rebounding strongly from a -0.7% contraction in the preceding year.
This vigorous activity is projected to culminate in an annual market value reaching KES 1.02 Trillion ( $7.89 Billion) in 2025. Key drivers include massive public investment in infrastructure, such as the proposed Nairobi-Mombasa Usahihi Expressway, and continued governmental focus on the Affordable Housing Program (AHP), which aims to deliver 200,000 houses annually.
