Economic Growth in Kenya
Kenya’s economic recovery is gaining momentum, yet most citizens are not seeing real improvements in their livelihoods, according to the Kenya Institute for Public Policy Research and Analysis (KIPPRA). The think-tank’s latest report reveals that the economy grew by 4.7 per cent in 2024, largely fueled by agriculture and services, but formal employment barely kept pace, adding fewer than 80,000 jobs.
Challenges in Job Creation
During the release of the "Kenya Economic Report 2025" on Tuesday, National Treasury CS John Mbadi highlighted that the country faces a critical challenge in converting economic gains into jobs that offer stability and income security. “While economic growth remains important, the true measure of success lies in the quality of jobs created. Prosperity can only be sustained if growth translates into secure, productive and inclusive employment opportunities,” Mbadi said.
Economic Improvements
The report notes improvements in the wider economy, with inflation dropping from 7.7 per cent to 4.5 per cent and the Central Bank of Kenya reducing the policy rate from 13 per cent to 10.75 per cent. These measures eased borrowing costs and aimed to stimulate private sector activity; however, the benefits have not fully reached the job market.
Informal Employment
Of the 782,300 new jobs created last year, roughly 90 per cent were in informal roles, offering limited security or benefits. Mbadi acknowledged that job creation has not kept up with a growing, youthful population. “A strong industrial base remains indispensable for creating high-quality jobs, enhancing competitiveness, and sustaining long-term growth,” he said.
The Reality of Informal Work
The report highlights that more than 80 per cent of Kenyan workers are employed informally, often facing low pay, unstable income, and no social protection. The disconnect between economic growth and meaningful employment is causing concern among businesses and policymakers. “Kenya is creating jobs, but not the kind that sustainably support consumption, savings or tax revenues,” KIPPRA executive director Eldah Onsomu said.
Sectoral Challenges
Agriculture and services are the main sources of expansion but remain largely informal, with wholesale and retail trade alone accounting for nearly half of all jobs in these sectors. Manufacturing, traditionally a source of formal employment, struggles due to high electricity costs, regulatory challenges, illicit trade, and rising input prices. Most growth in this sector occurs in small, informal enterprises rather than large-scale, high-productivity firms.
Barriers to Growth
Limited access to affordable credit, compliance costs, and weak market connections inhibit businesses from scaling up and offering formal employment. KIPPRA warns that unless urgent reforms are introduced, the prevalence of informal jobs may undermine Kenya’s long-term growth prospects and economic stability.
Conclusion
In conclusion, while Kenya’s economy is growing, the country faces significant challenges in creating high-quality jobs that offer stability and income security. The prevalence of informal employment and the lack of formal job opportunities are major concerns that need to be addressed through urgent reforms. The government and policymakers must work together to create an environment that supports the growth of formal employment and sustainable economic development.
