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Kenya's economic growth accelerated in the second quarter of 2025, reaching 5.0 percent, primarily fueled by a significant resurgence in the industrial sector and sustained performance in services and agriculture.
Kenya's economy recorded a robust 5.0 percent growth in the second quarter of 2025, an improvement from the 4.6 percent growth observed in the corresponding period of 2024. This acceleration is largely attributed to a strong rebound in the industrial sector, alongside consistent performances in the services and agriculture sectors, as detailed in the Central Bank of Kenya's (CBK) weekly bulletin released on October 3, 2025.
The industrial sector demonstrated a significant turnaround, expanding by 4.0 percent in Q2 2025, a substantial increase from the 0.2 percent growth reported in Q2 2024. This rebound was particularly supported by the construction and mining and quarrying activities. The construction sector grew by 5.7 percent in Q2 2025, reversing a 3.7 percent contraction in Q2 2024. Similarly, mining and quarrying surged by 15.3 percent, recovering strongly after a slump in 2024.
Beyond industry, other key sectors contributed to the overall economic expansion. The financial and insurance sector advanced by 6.6 percent, while transport and storage grew by 5.4 percent. Electricity and water supply also saw improved performance, posting a growth of 5.7 percent, up from 1.2 percent in Q2 2024. Agriculture, forestry, and fishing activities expanded by 4.4 percent, supported by increased output in coffee, fruits, vegetables, flowers, and milk, despite a decline in sugar and tea production.
The macroeconomic environment also played a role in this growth. Inflation eased to an average of 3.89 percent in Q2 2025, down from 4.87 percent in Q2 2024, primarily due to lower food and beverage prices. This easing inflation prompted the CBK to cut its benchmark lending rate twice, first to 10 percent in April and then to 9.75 percent in June 2025, a notable decrease from the 13 percent rate in June 2024. The Kenyan Shilling appreciated by 1.2 percent against the US dollar during the quarter, although it depreciated against other major international currencies.
Analysts suggest that these positive economic developments could influence public debate and policy execution in the near term. Stakeholders are urging for greater clarity on the timelines, costs, and safeguards associated with ongoing policy implementations. The government's Bottom-Up Economic Transformation Agenda, which prioritizes industrialization, infrastructure development, and job creation, is seen as aligning with the observed economic performance.
Despite the overall positive outlook, the country's current account deficit widened significantly to KSh 83.7 billion in Q2 2025, a 76.6 percent increase from the previous year. This expansion was largely driven by a wider merchandise trade deficit, as exports declined faster than imports. Additionally, net inflows in the services account contracted.
While the economic growth is positive, the widening current account deficit, driven by declining exports and increased imports, poses a potential risk to the country's external balance. The depreciation of the Kenyan Shilling against several major international currencies, despite its appreciation against the US dollar, could also impact import costs and external debt servicing.
Future economic performance will hinge on the sustained growth of the industrial sector, particularly construction and manufacturing. The impact of the eased monetary policy on private sector credit growth and investment will be crucial. Additionally, monitoring the current account deficit and export performance will be essential for assessing external sector stability.
The Kenya National Bureau of Statistics (KNBS) is the principal agency for collecting, analyzing, and disseminating statistical data in Kenya. The CBK regularly publishes economic indicators and reports, including weekly bulletins and quarterly economic reviews.
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