Kenya’s Economy Poised to Grow 4.9 – 5.2 Percent in 2026, KEPSA Forecasts | Dawan Africa

By Benadeta Mwaura - Reporter

Kenya, February 02, 2026 - Kenya’s economy is expected to strengthen in 2026, with growth projected between 4.9 percent and 5.2 percent, according to a forecast presented by the Kenya Private Sector Alliance (KEPSA) in partnership with the Nairobi Securities Exchange (NSE) and KPMG at the 2026 Economic Outlook Forum.

The projection signals a moderating recovery trajectory after slower expansion in previous years and suggests improving macroeconomic momentum, though challenges remain.

CEOs and private-sector leaders emphasised that the economy is stabilising, supported by declining inflation, resilient domestic demand and a rebound in key sectors, even as businesses navigate persistent global uncertainty, supply-chain pressures and fiscal pressures.

KEPSA Vice Chair Brenda Mbathi noted that while Kenyan economy growth remains below pre-pandemic historical averages of about 6 percent, the forecast reflects “a resilient bounce back” supported by improved performance across services, agriculture and construction.

The 4.9 – 5.2 percent growth projection draws on recent official data showing real GDP expansion of about 4.9 percent in the third quarter of 2025, up from 4.2 percent in the same period of the previous year, a trend driven by strong contributions from agriculture, construction and transport sectors.

Inflation has eased significantly since earlier macro pressures, falling into a stable range that supports consumer demand and business planning.

Agriculture and related activities have remained resilient, benefiting from favourable weather conditions and expanded food production.

A rebound in construction and infrastructure projects has helped sustain activity in sectors previously weighed down by cash-flow constraints.

Monetary policy easing and accommodative credit conditions have supported private-sector borrowing in key segments such as trade, consumer durables and agriculture.

Analysts also point to strengthening private sector credit growth, which climbed after a period of contraction, and a more conducive lending environment as contributing to improved aggregate demand.

While growth is forecast to improve, Kenya’s broader macroeconomic picture remains mixed:

Inflation has declined from double-digit levels earlier in the decade and remained within the Central Bank’s target range in late 2025, supporting household purchasing power.

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The exchange rate of the Kenyan shilling stabilised, and foreign exchange reserves strengthened, reducing vulnerability to external shocks.

However, the fiscal deficit widened in 2024/25, and public debt remains elevated, presenting risks that could weigh on government spending and long-term growth prospects.

In its Kenya Economic Update, the World Bank also lifted its near-term growth outlook to about 4.9 percent, reflecting a stronger-than-expected rebound in construction and other sectors, though it cautioned that fiscal pressures and global uncertainty remain downside risks.

For businesses and investors, a near-5 percent growth environment offers both opportunities and challenges:

Consumer and services sectors are expected to benefit from improved demand as inflation stabilises and credit availability improves.

Trade and logistics stand to gain from increasing domestic output and regional integration efforts under frameworks such as the African Continental Free Trade Area (AfCFTA).

Financial services may see expanded loan books if credit growth continues to recover, though high interest costs and nonperforming loans remain a concern.

Manufacturing and export-oriented industries will require supportive policies and investment to compete effectively amid global competition and trade uncertainties.

KEPSA and NSE leaders also emphasised the importance of deeper capital market engagement to finance private-sector growth, arguing that capital markets remain under-utilised as a source of long-term funding for infrastructure, small and medium enterprises, and innovation-driven sectors.