Kenya: A fragile search for economic recovery

The new government came to power with the anchor promise of reviving the already struggling economy and to put more money into the pockets of the bottom of the pyramid, building on the ‘hustlers’ bottom-up narrative. 

Despite the promise, a year on, the search for the economic recovery has instead become a mammoth challenge for the administration as the economy continues to dip and disenchantment grows, even among the core base. The decisions taken so far have impacted the country in many ways: 

• Policy shifts to raise revenue have seen a gradual rise in tax on middle-income earners, businesses, and tourism.  

• The steady rise in fuel and electricity prices has resulted in a consequent increase in the price of basic commodities. 

• The increase in fuel costs and cuts on food and fertiliser subsidies were broadly welcomed by the International Monetary Fund and World Bank. This has further increased the debt-burden on the middle-income earners who have had to take on a bigger chunk of the burden, as well as reduced disposable income as the impact of the aggressive tax regime starts to bite. 

• Binge borrowing against an earlier promise of slow debt – as of April 2023, the external debt from Kenya accumulated to roughly 5.1 trillion Kenyan shillings, approximately 35.08 billion US dollars. The value was equivalent to 52.9% of the country's total debt.  

Like many African countries, Kenya faces several development challenges including poverty, disease, unemployment, and low levels of civic engagement. However, without a stable economy and continuous poor governance decisions, things are expected to get worse.   

The impact of all this on Kenyans and the business community is enormous.  

According to Ipsos IKAT data (October 2023), 41% of Kenyans are concerned about the local political situation/ have leadership concerns. In addition, 70% have personal financial concerns, while 90% are concerned about inflation, the high cost of living and the rising prices of basic commodities. 

The business community is not left out. Our clients are equally affected. We are faced with a fragile forecast, even as we budget for 2024. 

Overall, the outlook is gloomy. Kenya remains on fragile grounds economically despite the forecasts projecting GDP to grow 5.6% in 2023 and 6.0% in 2024, driven by services and household consumption. 

Chris Githaiga

Country Manager, Ipsos in Kenya