Kenya's economy has delivered one of Africa's strongest long-term growth stories over the past two decades, lifting millions out of poverty and expanding access to jobs and essential services.
However, World Bank now warns that unless the country tackles deep-rooted structural weaknesses, those gains risk stalling, leaving millions locked out of quality employment and shared prosperity.
In a new report examining Kenya's growth trajectory over the last 20 years, the lender says the country stands at a critical crossroads.
While the economy has remained resilient, sustaining growth that creates well-paying jobs and reduces poverty will require sweeping reforms in public finances, exports, productivity and climate resilience.
Between 2001 and 2025, Kenya's economy expanded by an average of 4.5 per cent annually, driven largely by the services sector and other non-tradable industries, including government services.
During the same period, labour force participation increased, unemployment dropped sharply and poverty declined from 46.7 per cent in 2005 to 33.6 per cent by 2019 as more households gained access to jobs, healthcare, education and clean water.
However, the Covid-19 pandemic reversed many of those gains.
Poverty surged to 42.9 per cent in 2020 before easing, but it remains above pre-pandemic levels.
"At the same time, slowing economic growth, declining wages and rising debt have exposed weaknesses that were masked during years of steady expansion,'' the report reads.
The World Bank notes that Kenya's public debt had climbed to 71.3 per cent of GDP by the end of 2025, placing the country at high risk of debt distress.
The withdrawal of the Finance Bill 2024 following widespread protests also underscored the growing difficulty of relying on higher taxation to finance government spending.
According to the report, Kenya's previous growth model, anchored on large public investments financed through borrowing, has reached its limits.
"High debt servicing costs are consuming public resources while crowding out private investment by pushing up interest rates and limiting access to affordable credit."
The lender identifies four major obstacles standing in the way of sustained and inclusive growth.
For instance, it cites fiscal pressure, insisting that the country must maintain fiscal consolidation by reducing deficits, improving revenue collection and containing debt in order to restore macroeconomic stability.
The lender also mentions external competitiveness.
"Kenya's exports have become less competitive, export diversification has stalled and foreign direct investment remains subdued."
The World Bank says the country should exploit trade agreements more effectively, strengthen its integration into global value chains and attract more investment to boost export-led growth.
Low productivity and inadequate job creation as yet another obstacle standing in the way of Kenya's economic growth.
Although roughly 800,000 young Kenyans enter the labour market every year, fewer than 100,000 secure formal jobs.
According to the report, most workers remain trapped in low-productivity informal services and traditional agriculture, where wages are low and opportunities for advancement are limited.
The report argues that Kenya must improve its business environment, foster greater competition, strengthen infrastructure and bridge skills gaps to enable firms to grow and create more productive jobs.
It further recommends attracting skilled migrants in the short term to help address critical labour shortages.
The global lender highlights climate change as an increasingly significant economic risk.
"Repeated droughts and floods are undermining agriculture, destroying infrastructure and placing additional strain on public finances, while disproportionately affecting poor households."
It says Kenya is well positioned to capitalise on its renewable energy resources, digital strengths and green investments by expanding clean energy, climate-smart agriculture, green transport and disaster risk financing.
