Politics vs data: Is the economy doing well as the State claims?

When global credit rating agency Moody’s revised Kenya’s creditworthiness from negative to positive on January 24, 2025, it added fuel to the fire being spread by the government and its supporters on how good the economy is doing.                      

President William Ruto shared the news on social media: “We are doing well.”

In revising the outlook, Moody’s Rating stated that Kenya’s economy has grown more quickly while displaying lower volatility than similarly rated peers.

“The favourable growth performance supports a stable macroeconomic environment conducive to fiscal and economic reforms envisioned by the government,” said Moody’s.

In view of the difficult economic times—indicated by the closure of businesses, loss of jobs, enhanced taxes and increased cost of commodities—how well or badly the economy is doing has become a political narrative used to settle scores among rivals.

But if Kenya is doing well, who is benefiting in these tough times the majority of Kenyans seem to be going through?

A new report by ICEA LION Asset Management raises this question.

READ: Ruto: The country's economy has improved

“Over the last decade, Kenya has recorded strong economic growth relative to other countries.

“However, the widespread sentiment has been that the economic growth is not being felt on the ground,” says the ILAM Consumer Spending Index for last quarter of 2024.

“The index states that consumer spending may be an alternative way of gauging how the real economy is fairing.”

The growth of Kenya’s gross domestic product (GDP), which is the usual national measure of how the economy is fairing, declined for the better part of 2024.

It expanded by 5.0 per cent in the first quarter, 4.6 per cent in the second quarter and 4.0 per cent in the third.

This is confirmed by the National Treasury 2025 Draft Budget Policy Statement.

“Economic growth is estimated to have slowed down to 4.6 per cent in 2024 from a growth of 5.6 per cent in 2023, reflecting deceleration of economic activities in the first three quarters of 2024 and the slowdown in private sector credit growth to key sectors of the economy,” says the National Treasury in the statement.

There is, however, optimism with the National Treasury postulating that growth is expected to pick up to 5.3 per cent in 2025 and retain the same momentum over the medium term.

This will largely be driven by enhanced agricultural productivity, resilient services sector, and ongoing implementation of priorities under the Bottom-Up Economic Transformation Agenda (Beta).

Judd Murigi, Head of Research at ICEA LION Asset Management, told Sunday Standard that while GDP growth has declined for four consecutive quarters in a row, there are still some pockets of the economy which are doing fairly well.

“For example, the hotel industry seems to be doing well in terms of conferencing and occupancy; the banking sector’s profitability still remains as robust as ever and the retail sector is doing fairly okay,” he said.

“Although the retail sector has resulted in many promotions to enable their sales, we still see the stores proving to be resilient.”

According to the ILAM Consumer Spending Index, businesses defied the difficult economic times to record more sales, at least for those dealing with clothes and apparel; restaurants, hotels and leisure outlets, and retail stores.

House fittings and accessories recorded a drop in sales.

READ: William Ruto hit by perfect economic storm

The main reason for the increased sales, represented by 52 per cent, was due to more customers buying.

Compared to the same time last year, 61 per cent of respondents reported that their income had stagnated, while 24 per cent experienced a decrease and 15 per cent reported an increase.

Of those who reported an increase, 47 per cent had either engaged in a side hustle or changed jobs.

Those who reported a drop in income, a majority, 42 per cent, cited that their business was not doing well while 30 per cent linked the drop to increased taxes.

Eighteen per cent said they had lost their job.

Prof Samuel Nyandemo, a senior economics lecturer at The University of Nairobi, said the narrative that the country is doing well does not hold water.

He said all the major yardsticks that can determine how the country is doing are in miserable condition as he cited challenges with the National Treasury to disburse funds for school capitation and delayed salaries for civil servants.

“People do well when they have money in their pockets; when the prices of goods and services are low; when they have the purchasing power. All these I have mentioned are in miserable conditions,” he told Sunday Standard.

According to the ILAM Consumer Spending Index, cutting out non-essential spending, using savings and reducing quantities of essentials are some of the strategies Kenyans are employing to deal with high cost of commodities.

Safaricom’s lending facility Fuliza, at 22 per cent, followed by local shop arrangement (19 per cent) and friends (19 per cent) are the leading sources of credit for Kenyans struggling to make ends meet.

But despite such figures, which point to a majority of Kenyans struggling to make ends meet, those pushing the “economy is doing well” narrative also seem to have a valid argument on the low inflation of 3.3 per cent in January 2025 compared to 9.2 per cent in September 2022 when President Ruto took over the presidency.

The Kenya Shilling has also stabilised at around 129 against the US dollar and good rains have eased food prices, particularly maize flour.

Deputy President Kithure Kindiki, while at a function in Taita Taveta County last week, declared that late President Mwai Kibaki used his first five years to deal with macro-economic issues, which was the same strategy used by former President Uhuru Kenyatta.

“President Ruto has used two years to deal with the macro-economic stability,” he said.

“The work that remains in the next two and a half years is now macro-economic growth, incomes in households, revitalising sectors that majority of Kenyans derive their livelihood from so that they can have money in their pockets.”

Kindiki’s statement suggests that despite the claims that the economy is stable by the executive and Kenya Kwanza allied politicians, the effect is yet to trickle down to the common Kenyan.

A recent report by the Institute for Public Finance (IPF) released in January 2025 shares this concern even as it notes that poverty is reducing but at a slow pace.

It notes that Kenya’s poverty rate remains high for its level of income.

“Comparatively, Ghana has a similar GDP per capita but with a much lower poverty index (the poverty rate is 36 per cent in Kenya compared to 25 per cent in Ghana).

ALSO READ: State of economy: Is Ruto living in denial or just optimistic?

“This evidently shows Kenya’s growth is not shared equitably,” says the Macro-Fiscal Analytical Snapshot by IPF.

The Federation of Kenya Employers (FKE) at a press conference on January 24 revealed that close to 6,000 Kenyans have been laid off in the last three years which is likely to drive many into poverty.

“We have had 57 of our members who have declared redundancies over the last three years. Out of this, 5,567 employees were affected,” said FKE executive director Jacqueline Mugo.

This is due to the tough economic environment that has resulted to several companies downsizing or closing shop.

“These challenges strained employers, reduced productivity and hindered job creation,” said FKE.

The employers cited redundancies, closure of businesses and difficulty in compliance with the Employment Act regarding the two thirds limit set on payroll deductions for each month.

Mugo said the government has raided the payslip heavily and employees are being forced to borrow to make ends meet.

“In our calculations, 45 to 50 per cent of employees’ pay goes to taxes,” she said.