In the first half of 2025, the global economy posted moderate growth under continuing inflationary pressures, rising geopolitical tensions, and climate risks. The United States expanded by about 2.2–2.5%, supported by resilient consumer spending and policy easing. The Eurozone, strained by tight energy markets and cautious monetary policy, managed only about 1.0% growth. Emerging markets grew around 4.0%, though many were burdened by high borrowing costs, debt service, and trade disruptions. In Kenya, GDP rose by 4.9% in Q1 2025, driven largely by agriculture and manufacturing, with all sectors showing growth.

2025 Outlook:

Despite the challenges faced in 2024, projections for the third quarter of 2025 indicate a modest recovery.

• The Kenyan economy is projected to expand by 2.2% to 2.8% in 2025, marking a downward revision from earlier forecasts. This slowdown is primarily attributed to the introduction of new U.S. tariffs, which have disrupted global trade, strained supply chains, and dampened investor confidence worldwide.
• The Kenyan Shilling is expected to remain relatively stable against the U.S. Dollar in the near term. This outlook is supported by strong foreign exchange reserves, steady inflows from the diaspora, robust tourism earnings, and healthy export performance. However, rising demand for imports and the burden of external debt servicing may exert some pressure on the currency.
• Inflation is anticipated to remain within the Central Bank of Kenya’s target range of 2.5% to 7.5%, thanks to favourable weather conditions and a stable exchange rate. Nonetheless, potential risks such as geopolitical tensions and the resurgence of protectionist trade policies could disrupt supply chains and push prices upward.
• Interest rates are expected to decline gradually, driven by lower domestic borrowing needs, a stable currency, and a supportive monetary policy stance by the Central Bank. Still, if government financing requirements increase, this could create an upward pressure on rates. In Q3 2025, interest rates are projected to stay largely stable, backed by low inflation and a steady currency. Improved investor confidence may further support rate stability, although a rise in domestic borrowing could limit the extent of this benefit.
• The equities market is forecasted to achieve moderate growth in the third quarter, buoyed by strong corporate earnings and dividend distributions. However, geopolitical uncertainty and investor profit-taking could temper market performance.