Agriculture Remains Pillar of Kenya’s GDP Despite Slower Growth in 2024
In picture, Alpesh Vadher,PKF East Africa Chief Executive Officer, James Mulili, Director Tax at PFK, and Michael Mburugu, Regional Tax Partner PFK during a media engagement in Nairobi.
By Aoma Keziah,
According to PKF Kenya, an accounting and business advisory firm, Kenya’s economy expanded by 4.7% in 2024, slowing slightly from 5.7% the year before. The performance still reflects resilience in several sectors, although the country faces structural challenges that need close attention.
They say that Growth was mainly supported by services and agriculture, the financial and insurance sectors grew by 7.6%, while real estate and transport also showed improvement. Agriculture, forestry, and fishing grew by 4.6% a slowdown compared to 2023, but still a key driver of GDP. However, the construction sector contracted by 0.7%, and mining saw an even steeper drop of 9.2%, dragged down by lower production of key minerals.
“The nominal GDP rose to KES 16.2 trillion from KES 15 trillion the previous year. The service sector made up 61.1% of the economy, with agriculture contributing 22.5%. GDP per capita also grew, reaching KES 309,460 in 2024, up from KES 291,770 in 2023,” stated Alpesh Vadher, PKF East Africa Chief Executive Officer
To support economic activity, the Central Bank cut the policy rate to 10% in April 2025 from 11.25% in December 2024. Other short-term rates also eased, including the 91-day Treasury bill rate, which fell to 8.29% in May. While average commercial bank lending rates remained high at 16.89%, PKF expects further downward pressure on rates due to easing global inflation and falling global interest rates.
“Inflation cooled to 4.5% in 2024, the lowest rate in five years, lower food prices were the main factor. Inflation is expected to stay within the official target range, supported by a stable exchange rate and reduced energy costs,” Vadher added.
The Kenyan Shilling regained ground in 2024, strengthening against major currencies like the US dollar and Euro. PKF attributes this to stronger investor confidence, boosted by the refinancing of the 2024 Eurobond and successful issuance of infrastructure bonds. Many investors shifted funds from foreign currency holdings to local bonds, increasing the supply of dollars in the market.
The currency also benefited from external factors, including a weaker US dollar driven by changes in trade policy. Within East Africa, the Kenyan Shilling gained against the Ugandan and Tanzanian currencies but lost ground to the Rwandan Franc.
“ By June 2024, Kenya’s public debt stood at just under KES 10 trillion. Domestic debt rose by over 12%, and multilateral debt increased slightly, with the IMF’s exposure rising by 25.5%. We note that while debt remains sustainable, it is still a concern, especially in light of global economic volatility. The Government aims to reduce the debt-to-GDP ratio to around 55% by 2028 through fiscal consolidation and increased use of concessional borrowing,” explained James Mulili, Director Tax PKF.
The 2024/25 budget projects a deficit of KES 862.7 billion. Tax revenue is expected to reach KES 2.5 trillion, but PKF cautions that this will be a tall order given current economic conditions and a narrow tax base.
They also noted that the Government’s effort to widen the tax net has shown progress. In 2023/24, over 1.2 million new taxpayers were added, and tax revenues increased by KES 24.6 billion under the expansion strategy. Despite this, compliance remains low relative to the country’s adult population.
“We support the ongoing measures like improved rental income monitoring, digital platform taxation, and stricter enforcement, but the gap between potential and actual collections remains wide,” Mulili added.
On the Finance Bill 2025, they said it proposes a major shift in how tax incentives are offered, expressing concerns over plans to restrict the carry forward of tax losses to five years, repeal key investment deductions, and remove preferential corporate tax rates for manufacturers and developers. These changes, if implemented, could hurt investment and long-term growth.
“ Further, proposals to change how VAT refunds are handled may worsen cash flow issues for businesses, even as they aim to reduce backlog and plug revenue leakages,” the PKF Tax Director continued to say.
One controversial proposal in the Finance Bill is the removal of legal restrictions that prevent the tax authority from accessing trade secrets and personal data, the company raises strong objections to this, saying it undermines privacy protections and could damage trust between taxpayers and authorities. The lack of a clear legal framework for data protection adds to the risk.
The firm also emphasizes the need for a consistent tax environment. The National Tax Policy and the Medium-Term Revenue Strategy, both introduced in 2023, were intended to address this, but progress has been limited. Frequent and unpredictable changes to tax laws remain a major concern for businesses.
PKF believes that Kenya’s economic outlook for 2025 is broadly positive, with growth expected to continue, especially if favorable weather supports agriculture and global interest rates keep falling. However, it cautions that this growth must be balanced with responsible debt management, a fair tax regime, and better policy consistency to build long-term resilience.
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