The lower projection marks a slowdown from earlier expectations as policymakers grapple with the impact of high borrowing costs, subdued private sector investment and slower growth in key sectors of the economy.
Economists said household spending has remained under pressure due to the high cost of living, while businesses continue to face elevated financing costs despite easing inflation.
The downgrade also reflects uncertainty surrounding fiscal reforms and government efforts to reduce public debt while maintaining economic stability. Kenya has implemented a series of spending cuts and revenue measures aimed at narrowing the budget deficit and meeting commitments under its International Monetary Fund programme.
Agriculture, tourism and financial services are expected to remain key drivers of growth, although adverse weather conditions and weaker global demand could weigh on export earnings.
The revised outlook comes as President William Ruto’s government seeks to restore investor confidence following months of political tensions and public protests over tax increases and the rising cost of living.
Despite the downgrade, analysts expect Kenya to remain one of East Africa’s fastest-growing economies, supported by infrastructure investment, a resilient services sector and continued expansion in digital finance.
Government officials have maintained that ongoing economic reforms will strengthen long-term growth, improve fiscal sustainability and create a more stable environment for investment, even as short-term challenges continue to weigh on economic activity.
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