Kenya’s economy is poised for a significant upturn this year, with projected growth reaching 5.5 percent. This positive outlook is underpinned by robust performance in the tourism sector and a recovery in agriculture. Additionally, lower inflation and strong remittances to Kenyan households are expected to boost consumer spending, which will be a key driver of growth in the coming years.
“Kenya’s improved external position is likely to enhance investor confidence and strengthen its ability to access international financing,” said Tangeni Shatiwa, an economist at Finnfund. This improvement is already evident in the strong investor demand for Kenya’s recent USD 1.5 billion Eurobond issuance in February, marking its second such issuance since the beginning of last year.
Prior to 2024, Kenya faced significant challenges in accessing external financing due to a weak external position. However, the country has made substantial progress over the past year. Its external deficit narrowed to 3.6 percent of GDP in 2024, down from 4.4 percent in 2023. This improvement has been bolstered by strong inflows from bilateral and multilateral lenders, which have helped increase foreign exchange reserves.
Shatiwa also highlighted that Kenya stands to benefit from recent changes in US trade policy. While many African countries face risks from these policy shifts, Kenya is well-positioned to negotiate a favorable trade deal with the US. “Kenya is considered a key ally in the region, and its low export dependency on the US, combined with a relatively low reciprocal tariff of 10 percent on textile exports, makes its products more competitive compared to those from China,” Shatiwa explained.
Several sectors in Kenya offer promising investment opportunities. The ICT sector, in particular, has been a driving force for innovation and dynamism in the country. Finnfund has invested in this sector through ventures such as Twiga Foods, a mobile-based platform connecting small farmers with retailers, and Kasha Technologies, an e-commerce platform that digitizes healthcare and other product provisions. Finnfund has also invested in Kentegra Biotechnology Holdings, which supports smallholder pyrethrum farmers by providing them with a drought-resistant income source.
Despite facing economic shocks in recent years, Kenya remains an attractive destination for businesses and investors in the region. Last year, despite a slowdown in growth to 4.7 percent, Kenya still outperformed the Sub-Saharan Africa average. This highlights the strength of its dynamic, services-led private sector compared to its peer countries, according to Shatiwa.
