NAIROBI, Kenya – The World Bank has lowered Kenya’s economic growth forecast for 2026 to 4.3 per cent, citing heightened global uncertainty, rising energy prices and the economic fallout from the recent Middle East conflict.
In its latest Kenya Economic Update released on Thursday, the lender revised its 2026 projection down from the 4.9 per cent forecast issued in November. It also projects the economy will expand by 4.4 per cent in 2027.
The revised outlook is 0.6 percentage points below the Kenyan government’s forecast of 5.0 per cent growth this year.
According to the World Bank, the downgrade reflects the impact of elevated global energy prices and uncertainty stemming from instability in the Middle East, factors expected to raise production costs and weaken economic activity.
“In the short term, higher global energy prices and increased uncertainty are expected to raise production costs, weaken private investment growth and weigh on household purchasing power through higher commodity prices and moderating remittance inflows,” the report states.
Treasury Cabinet Secretary John Mbadi had projected a stronger outlook while presenting the 2026/27 Budget in Parliament last month, estimating the economy would grow by 5.0 per cent in 2026 before accelerating to 5.2 per cent in 2027.
Official data shows Kenya’s economy expanded by 4.6 per cent in 2024.
Despite the downward revision, the World Bank said several domestic factors are expected to cushion the economy from external shocks. These include favourable agricultural production, easing monetary policy, exchange rate stability and a gradual recovery in private sector lending.
The lender noted that Kenya remains among East Africa’s fastest-growing economies, having maintained average annual growth of about five per cent in recent years despite global economic headwinds.
However, it warned that continued disruption around the Strait of Hormuz could sustain higher fuel prices and transport costs, increasing the prices of essential goods and services and placing additional pressure on household incomes.
The report estimates that the resulting inflationary pressures could increase Kenya’s poverty rate by between two and 4.5 percentage points, pushing an additional one million to 2.4 million people below the international poverty line of US$3 per person per day.
Beyond external risks, the World Bank identified climate-related shocks, including droughts and floods, as well as political uncertainty ahead of Kenya’s 2027 General Election, as potential threats to economic growth.
“Approaching elections may delay private investment decisions, increase policy uncertainty and slow implementation of structural reforms,” the World Bank said.
It added that pre-election spending pressures could weaken fiscal discipline, delay planned fiscal consolidation and dampen business and consumer confidence.
Despite the challenging outlook, the World Bank reaffirmed its support for Kenya’s economic reform programme.
In late June, the institution approved a US$750 million budget support loan alongside a US$500 million sustainability-linked financing facility aimed at helping Kenya reduce reliance on costly domestic borrowing while advancing fiscal and structural reforms.
The financing is expected to strengthen public finances, support macroeconomic stability and create fiscal space for investments in priority sectors as the government seeks to sustain economic growth amid an increasingly uncertain global environment.