By Benadeta Mwaura - Reporter
Kenya, 13 November 2025 - Kenya’s economy is expected to accelerate in 2026, supported by declining borrowing costs, stronger export performance, and improved household spending, according to a consensus of global banks, consultancies, and think-tanks.
What’s Changing
The December 2025 Focus Economics Consensus Forecast projects Kenya’s GDP growth at 5.0 % in 2026, up from an estimated 4.9 % in 2025.
This places Kenya above the Sub-Saharan African average of 4.1 percent.
A key driver of this improvement is the Central Bank of Kenya’s (CBK) sustained easing of credit costs. Since February 2025, the policy rate has been lowered from 11.25 % in January to 9.50 % by August, marking seven consecutive reductions aimed at stimulating lending, investment, and household spending while keeping inflation within target.
Economists at the Economist Intelligence Unit (EIU) highlight the impact of cheaper credit on investment:
“In 2025, economic growth should strengthen as accelerating fixed investment, buoyed by laxer financing conditions, outweighs softer momentum in exports.”
However, surveys such as the one conducted by TransUnion Kenya in August 2025 reveal that high borrowing costs continue to limit access to formal credit, with 68 % of potential borrowers refraining from applying due to affordability concerns.
CBK has acknowledged these challenges, stating that there remains scope for further easing of the monetary stance to support private-sector credit and economic activity.
Timeline of Recent Interest-Rate Moves in Kenya:
- February 2025: Policy rate lowered to 10.75 % from 11.25 %.
- April 8, 2025: Rate cut by 75 bps to 10.0 %, fifth straight reduction.
- June 10, 2025: Rate cut by 25 bps to 9.75 %, sixth consecutive cut.
- August 12, 2025: Rate cut by 25 bps to 9.50 %, seventh consecutive reduction.Despite these cuts, average bank lending rates remain around 15.77 %, indicating a lag in the transmission of policy easing to borrowers.
Why Is this important?
Lower credit costs unlock key growth channels. Cheaper lending encourages businesses to invest in expansion, equipment, and jobs while enabling households to borrow for consumption and asset accumulation.
More from Kenya
The improved borrowing environment supports services, manufacturing, and export sectors. The World Bank projects Kenya’s growth to recover to 4.9 percent during 2026‑27, driven by accommodative monetary policy, easing inflation, and a pickup in credit growth.
However, challenges persist. High public debt, around 65 % of revenue is allocated to debt servicing, remains a downside risk. Analysts warn that fiscal discipline and structural reforms are critical to sustaining growth momentum.
What This Means for Stakeholders
For businesses, the falling policy rate translates into more affordable financing for expansion and hiring.
Households may benefit from cheaper mortgages and consumer loans, potentially boosting spending and improving living standards.
For the financial sector, banks may see increased loan demand, but balancing growth with credit risk remains key. Policymakers must ensure that monetary easing is matched with improved access to credit, fiscal prudence, and structural reforms to fully harness the growth potential.
The Future Outlook
Sustained economic growth in 2026 will depend on continued credit expansion, a stable macroeconomic environment, robust export performance, and fiscal prudence.
If these factors align, Kenya could move into a higher growth trajectory, improving employment, household wealth, and private-sector confidence.
Conversely, shocks such as global capital flight, currency volatility, or worsening debt could stall the recovery.
Kenya appears poised for stronger economic performance in 2026, supported by lower credit costs, rising household consumption, and improved investment climate.
The challenge now lies in translating these monetary gains into tangible growth, ensuring that fiscal discipline, structural reforms, and private-sector confidence align to sustain momentum.
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