Treasury Cabinet Secretary John Madi. Photo/courtesy.
Kenya’s economy is poised for a gradual recovery in 2026 as macroeconomic stability improves and activity in key sectors strengthens, according to recent forecasts from global lenders and data from the World Bank’s latest Kenya Economic Update 2025.
The multilateral lender projects that real gross domestic product (GDP) will expand by about 4.9 percent in 2026, slightly higher than the 4.7 percent growth recorded in 2024, reflecting a modest strengthening of economic momentum.
This anticipated growth is supported by a combination of factors. Inflation is expected to remain stable around 5.0 percent, offering room for continued monetary policy easing aimed at stimulating borrowing and investment.
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The Central Bank of Kenya (CBK) has already cut its benchmark rate multiple times to support lending and private sector activity. Construction and infrastructure spending have played an important role in the recovery, driven by lower borrowing costs and the settlement of government arrears that previously constrained activity.
Despite these positive signs, Kenya still faces significant structural challenges. The World Bank flags the need for procompetitive reforms to boost productivity and job creation across the economy.
Currently, restrictive product market regulations and weak competition in key sectors are stifling private investment and limiting the creation of high-quality formal jobs. Procompetitive reforms could potentially add up to 1.3–1.4 percentage points to annual GDP growth and generate hundreds of thousands of better-paying jobs if implemented effectively.
Fiscal pressures also remain elevated. The government deficit widened in the 2024/25 fiscal year, driven by revenue shortfalls and rigid expenditure patterns and public debt remains high. Maintaining fiscal discipline while financing essential growth-supporting investments is a central policy tension.
