World Bank2025-11-252025-11-252025-11-21https://hdl.handle.net/10986/44020Kenya’s monetary and external policy environment is solid; however, its fiscal outlook places the country at a crossroads. Fiscal slippage persisted in FY2024-25 with the deficit widening to 5.9 percent of gross domestic product (GDP), compared to the revised budget target of 4.3 percent. The total stock of public debt increased in FY2024-25, reflecting ongoing macroeconomic vulnerabilities. The current account deficit widened to September 2025, driven by a recovery of domestic demand. Private sector credit is recovering, reflecting a more accommodative monetary policy. Real GDP growth is projected at 4.9 percent on average for 2025-2027; however, the outlook is subject to elevated risks. Kenya has a legal and regulatory environment that is more restrictive to competition than the frontier of advanced economies with more open markets. The breadth of state-owned enterprises (SOEs) and poor SOE governance structures create significant distortions to fair competition in Kenya. Addressing the barriers to competition can yield significant benefits in terms of growth and jobs outcomes.en-USCC BY-NC 3.0 IGOECONOMIC GROWTHECONOMIC DEVELOPMENTFISCAL POLICYMONETARY POLICYECONOMIC MODELINGReportWorld Bank