Economy shows signs of recovery in new boost for jobs and salaries

Residents stock up for Christmas at Wakulima Market in Nakuru City on December 23, 2025. [Kipsang Joseph, Standard]

The economy expanded at a faster pace in the third quarter of 2025, boosting hopes for job creation, higher incomes and a potential easing of a severe cost-of-living squeeze that has battered households, latest data from the government now shows.

The growth, while modest, marks a positive turn for President William Ruto's administration, which is under pressure to deliver on its flagship economic promises ahead of the General Elections that is less than two years away.

According to the Kenya National Bureau of Statistics (KNBS), gross domestic product (GDP) grew by 4.9 per cent in the July-September period, up from 4.2 per cent in the same quarter of 2024. The performance was driven by a robust rebound in key sectors including construction, mining and hospitality, though the recovery remains uneven with some areas of agriculture and manufacturing lagging.

The most dramatic turnaround was seen in the construction and mining industries. The construction sector, a significant employer, rebounded from a 2.6 per cent contraction in the third quarter of 2024 to expand by 6.7 per cent this year. KNBS pointed to a 16.2 per cent rise in cement consumption and increased imports of iron, steel, and bitumen as indicators of revived activity.

Mining and quarrying staged an even stronger recovery, soaring by 16.6 per cent compared to a 12.2 per cent contraction a year earlier.

Earlier data and analysis from the World Bank has shown that the Ruto-led government's controversial affordable housing programme is a major driver of this economic recovery, directly fueling demand in the cement sector after a slump last year.

The accommodation and food service sector remained a powerhouse, growing by 17.7 per cent, "majorly supported by increased visitor arrivals as Kenya co-hosted the African Nations Championship." International arrivals at main airports rose by 9.9 per cent to hit 578,234 passengers.

Other significant contributors included real estate (5.7 per cent growth), financial and insurance activities (5.4 per cent), and transport and storage (5.2 per cent). The critical agriculture, forestry, and fishing sector grew by 3.2 per cent, though this was slower than the 4 per cent growth seen a year prior.

The report highlighted persistent weaknesses. Within the agricultural sector, which is one of Kenya's top employer, exports of coffee and vegetables fell sharply, declining from 17,732.8 and 20,480.9 metric tonnes respectively in Q3 2024 to 8,312.7 and 16,617.0 metric tonnes this year. Sugar production plummeted by 49.4 per cent. 

The manufacturing sector’s growth, another crucial sector, was muted at 2.5 per cent, held back by a significant decline in food production, even as non-food manufacturing improved. The information and communication sector also saw a slower growth of 4.5 per cent, down from 6.9 per cent, hampered by a substantial drop in international bandwidth usage.

The data offers a mixed picture for household finances. While the Kenyan shilling appreciated slightly (0.2 per cent) against the US dollar year-on-year, it depreciated against other major currencies like the Euro and Pound Sterling. 

More importantly, inflation edged higher, with the average rate for the quarter rising to 4.42 per cent from 4.08 per cent a year earlier, "mainly driven by rise in prices of items in the Food and Non-Alcoholic Beverages category” wiping off any perceived gains. 

However, there were signs of easing financial conditions intended to stimulate the economy. 

The Central Bank Rate was cut to 9.50 per cent in September 2025 from 12.75 per cent a year earlier, leading to lower commercial lending rates. Credit to the private sector grew, and the Nairobi Securities Exchange saw a dramatic surge, with the NSE 20 Share Index jumping to 2,973 points from 1,776 a year ago.

The news comes as a potential boost for Ruto's Kenya Kwanza administration, which is facing mounting public discontent over high living costs just under two years before the next general election.

Ruto was elected on a platform pledging to uplift the "bottom-up" economy, create jobs, and raise incomes for the poor, but many voters say they have yet to feel tangible improvements.

The reported economic acceleration, if sustained, could begin to translate into the job creation and income growth the administration has promised. However, the widening current account deficit, which ballooned to Sh135.3 billion from Sh43.5 billion a year earlier, underscores ongoing vulnerabilities.

"The growth was mainly supported by accelerated growth in a number of sectors," the KNBS report stated, noting the broad-based recovery. For cash-strapped Kenyans, the hope will be that this momentum finally brings the promised reprieve from the relentless cost-of-living pressures.