Overview

The country has made significant political and economic reforms that have contributed to sustained economic growth, social development, and political stability gains over the past decade. However, its key development challenges still include poverty, inequality, youth unemployment, transparency and accountability, climate change, continued weak private sector investment, and the vulnerability of the economy to internal and external shocks.   

Although the economic outlook is broadly positive, it is subject to elevated uncertainty. The failure to achieve fiscal consolidation targets could exacerbate Kenya’s debt vulnerabilities, especially due to the high-debt service repayments. Climate hazards could resume inflationary pressures and food insecurity, affecting growth. Lower than anticipated growth in developed countries could undercut ongoing recovery in tourism, exports, and remittances. Elevated commodity prices would further tighten financial conditions, weaken external balances, and impact inflation.

Over the past year, Kenya’s development trajectory has been significantly influenced by climate-related shocks, particularly in the Arid and Semi-Arid Lands (ASAL) counties. The October to December 2024 short rains were below average, leading to poor harvests, rising production costs, and pest infestations, which together exacerbated food insecurity and undermined livelihoods. By mid-2025, conditions had worsened considerably, with a growing number of households facing severe food shortages and malnutrition rates remaining critically high, especially among young children requiring urgent treatment.

Conditions began to improve following the March to May 2025 long rains, which were average to above average and helped ease drought conditions across all ASAL counties. However, despite this recovery, the overall food security situation remains fragile due to the cumulative effects of previous failed seasons. At the same time, heavy and prolonged rainfall led to flooding, displacement, and loss of life, further highlighting the country’s vulnerability to climate extremes. Addressing these overlapping challenges will require sustained investment in climate resilience, strengthened food systems, and coordinated humanitarian and development responses to support vulnerable communities and stabilize livelihoods.

Source: World Bank & OCHA, 2025