June Outlook: Looser belts, more travels

Mid-year school break is approaching, which means traveling and holidaying in Kenya, a season that could reward the economy with more spending amidst the tough times.

This month begins with Madaraka Day celebration, brings back the children on holiday, and hosts a series of religious and cultural festivals across the country is typically a turnaround for the year after a difficult start.

Kenya is recovering from a difficult year, faced with several headwinds, including high local and global interest rates, austerity measures in government that hit incomes and slowed consumption. Last year the country also faced flooding during the El Nino period, coupled with a Gen Z crisis over taxation. The GDP last year grew at 4.7 percent, a slower rate compared with 5.7 percent a year earlier.

This year, Kenyan authorities expect the economy to rebound to around 5.5 percent on the tailwinds of declining interest rates and relative stability in the macroeconomic environment. This is expected to boost the financial sector asfter the Kenyan central bank slashed its benchmark rate by 300 basis points to 10 percent, which is expected to increase loan supply and get the economy going.

We also expect favorable weather to continue supporting higher growth in agriculture as well as the construction

President Ruto CEMENTS legacy

And without the latches of the International Monetary Fund and a government desperate to win back public trust, political campaign spending is also ratcheting up.

The Kenyan government is also supporting spending in the construction sector, building affordable housing projects to help meet the 250,000 annual demand and a housing deficit of 2 million units, and to offer market incentives for mortgage purchase to encourage lower-income families to own a home. The government is also building markets across the country, a push that could also boost construction or set the stage for political fallout with county governments who claim jurisdiction and control.

Construction is also expected to pick up with the thawing up of Kenya relations with China after President William Ruto recently visited Beijing and signed various deals with his Chinese counterpart, President Xi Jinping on cooperation between the two countries. The deal, premised on mutual interests, has components of investment, infrastructure construction, science and technology, education, culture, and tourism.

China, a key bilateral lender to the country that financed the Standard Gauge Railway, dropped off during US President JoeBiden’s rule that sought closer ties with Nairobi at the expense of Beijing.

Change of guard in Washington to President Donald Trump has seen Kenyan loose the American influence and return to China for deals.

June 2025 apology

Kenyan authorities are also wary of political landmines that lie across this narrow path to recovery. The government is likely to encounter observation of memorials for the tragic day and how they handle the sensitive and emotive matter will define the powder cake.

President Ruto has apologized for the June 25 Gen-Z killing on the lawns of Kenyan parliament amid calls for state reparations.

That has not stopped President Ruto’s regime’s intolerance to contrary opinion with the arrest of software developer and activist Rose Njeri for developing an online tool known as Civic Email, designed to facilitate public objections to the Finance Bill 2025.

The government is also navigating budget headaches to implement spending cuts in the public sector, amidst falling tax revenues and indirect hits from rising protectionist policies in global trade as well as unforeseen withdrawal of funding across western donor countries.

Kenya also needs to get a deal with the International Monetary Fund for a program that will allow the government spending flexibility but still provide currency insurance as Kenya approaches the mountains of debt repayments coming fast at us.