Kenya’s 2025 slowdown driven by domestic policy, not global shocks - Economist

Kenya’s economic slowdown in 2025 reflects domestic policy challenges rather than global shocks, according to Economist and CEO, ELIM Capital Odhiambo Ramogi.

He says the country is underperforming compared to its regional peers despite stable global growth.

Speaking on Radio Generation on Monday, Ramogi noted that global growth held at 3.3% in both 2024 and 2025, despite geopolitical tensions and trade disruptions.

“Notwithstanding Trump’s tariff wars… the world still managed to grow significantly,” he said, adding that Sub-Saharan Africa expanded by 4.4%, while East Africa averaged about 4.8%, with countries like Uganda and Tanzania exceeding 6%.

In contrast, Kenya’s economy grew by 4.6% in 2025, an improvement from 4.1% the previous year, but still lagging behind its regional peers.

“It is good news that we are still growing… but it is bad news that it’s slowing for the second year running,” Ramogi said, attributing the trend to internal policy decisions. “You cannot blame the international scene… the case here is purely a matter of policy.”

He pointed to sectoral weaknesses, particularly in agriculture, which he said is being affected by climate change.

“Agriculture is no longer growing as fast as we would want… it’s affecting production in the tea sector… and even our food crops,” he noted.

While construction has been highlighted as a key growth driver, Ramogi questioned its broader economic impact, especially in job creation.

“The problem with construction sector is it’s very expensive to produce one job,” he said, arguing that service sectors generate employment more efficiently.

He also challenged official employment figures, which suggest that Kenya created over 800,000 jobs in 2025.

“What the economic survey is telling us is we doubled jobs… but the same survey is telling us we slowed down,” he said.

According to him, the data does not fully support claims that construction is the main source of new jobs.

“The construction sector contributed only 30,000 new jobs,” he said, contrasting this with significantly higher figures attributed elsewhere. Instead, he identified wholesale, retail, and hospitality as the leading contributors, noting they accounted for more than 400,000 new jobs.

Data from the Kenya National Bureau of Statistics Economic Survey 2026 shows that most new jobs were created in the informal sector, which continues to dominate Kenya’s labour market. The report indicates that while total employment increased significantly, much of this growth was in small-scale trade and service activities rather than large infrastructure projects.

The survey also highlights ongoing structural challenges in the economy, including reliance on climate-sensitive sectors and uneven productivity gains across industries.

While government-backed initiatives such as infrastructure development and affordable housing have supported growth, analysts say their impact on sustainable job creation remains limited.

Ramogi warned that unless policy adjustments are made, Kenya risks falling further behind its regional peers.

“From where I sit, that points to only one thing… policy,” he said, calling for reforms to stimulate more inclusive and resilient economic growth.