The economy expanded by five percent in the second quarter of 2025, compared to 4.6 percent in the same period last year, driven by a rebound in construction activity and strong performance in the agriculture and financial sectors.
A new report by the Kenya National Bureau of Statistics (KNBS) on the country’s total economic output, or gross domestic product (GDP), shows that growth in construction helped stimulate the economy, which also benefited from lower interest and exchange rates.
The construction and mining sectors rose by 5.7 percent and 15.3 percent, respectively, after contracting in the second quarter of 2024.
Although agriculture registered slower growth in the review period compared to the second quarter of 2024, it remained a major driver of the economy, expanding by 4.4 percent. Agriculture contributes about a fifth of GDP. The slowdown in crop production was attributed to reduced output of tea and sugar.
“In the second quarter of 2025, the Gross Value Added (GVA) for agricultural activities recorded a slight deceleration compared to the corresponding quarter of 2024,” said KNBS in its Quarterly Gross Domestic Product Report.
“Nonetheless, favourable weather conditions continued to support both crop and animal production during the review period,” it added in the report released on Tuesday.
The growth, however, was slower than in the same period in 2023, when the economy expanded by 5.5 percent on the back of strong agricultural performance.
KNBS also attributed the second-quarter growth to an increase in transportation and storage (5.4 percent) and financial and insurance (6.6 percent), though these sectors grew at a slower pace compared to 2024.
The turnaround in construction stood out. The sector’s improved performance was partly due to increased spending on affordable housing projects across the country, alongside President William Ruto’s focus on road maintenance.
“The sector’s performance was manifest in cement consumption and import of construction materials,” said KNBS, noting that cement consumption increased by 23.9 percent to 2,424,400 tonnes, up from 1,957,100 tonnes in the corresponding period of 2024.
Imports of bitumen—a sticky, waterproof binder mainly used in road and runway construction—rose to 22,659,300 tonnes from 15,566,200 tonnes in the same quarter of 2024, reflecting increased government investment in road projects.
Last year, the construction sector contracted for two consecutive quarters—the second and third—due to significant budget cuts to mega infrastructure projects under the Kenya Kwanza government, coupled with the high cost of building materials, including cement and bitumen.
The economic rebound, which comes amid lower interest and exchange rates as well as renewed activity at the Nairobi Securities Exchange (NSE), remains weaker than in the second quarter of 2023, when GDP grew by 5.5 percent.
Last year, growth was constrained by high interest rates after the Central Bank of Kenya (CBK) raised its benchmark lending rate to curb inflationary pressures. Since then, the CBK has been easing the Central Bank Rate, signalling commercial and microfinance banks to lower borrowing costs and stimulate the economy.
The CBK has also introduced regulations for credit guarantee firms to give lenders confidence when extending loans to high-risk borrowers, including micro, small, and medium enterprises (MSMEs), which are considered the engines of the economy but remain underserved by banks.
Credit guarantee firms will be required to raise a minimum capital of Sh1 billion and stand ready to absorb a percentage of potential loan losses, in return charging banks for this loan insurance service.
