Kenya Economy Set for Strong Rebound in 2026
Kenya’s economy is demonstrating clear signs of recovery after a slower performance in 2024, with fresh projections indicating a stronger expansion in the next two years. The 2026 Economic Outlook released by the Kenya Private Sector Alliance (Kepsa) in collaboration with the Nairobi Securities Exchange (NSE) and KPMG shows that leading indicators are pointing toward renewed momentum across key sectors.
According to the report, the Central Bank of Kenya projects economic growth of 5.2 percent in 2025 and 5.5 percent in 2026, marking a steady rebound from the previous period. The expected growth will be supported by the continued resilience of the service sector, improved agricultural output, and a recovery in industrial activity.
Services and Agriculture Drive Recovery
Analysts note that Kenya’s service industry—which includes finance, ICT, tourism, transport, and trade—remains the backbone of the economy. Digital transformation, mobile money innovation, and regional trade are expected to keep the sector vibrant. Tourism has also shown renewed strength as international arrivals improve and conference tourism gains momentum.
Agriculture, which contributes over 20 percent of GDP and employs millions, is projected to perform better due to favourable weather patterns and government interventions in fertiliser subsidies and irrigation. Improved production of tea, coffee, horticulture, and cereals is expected to stabilise rural incomes and boost domestic consumption.
The industry sector, which struggled in 2024 due to high energy costs and weak consumer demand, is anticipated to rebound as manufacturing firms benefit from easing inflation and a more stable shilling.
Businesses Urged to Stay Agile
Despite the positive outlook, private sector leaders cautioned that companies must remain flexible and innovative. Speaking during the Economic Outlook forum in Nairobi, Kepsa vice chairperson Brenda Mbathi said businesses are operating in a period of global uncertainty marked by shifting trade alliances, geopolitical tensions, and rapid technological change.
“Opportunities exist, but they will only benefit enterprises that are ready to adapt, invest in skills, and embrace digital transformation,” Mbathi said, adding that the private sector remains central to driving inclusive growth through investment and job creation.
Inflation Eases but Risks Remain
The report notes that inflation has cooled to the 3–5 percent range, providing relief to households and firms. However, participants at the forum warned that food and fuel prices remain vulnerable to global shocks such as supply chain disruptions, climate-related events, and changes in oil markets.
Fiscal pressures also persist as the government balances between revenue mobilisation and public spending needs. Analysts emphasised that prudent monetary and fiscal policies will be necessary to protect the gains already made.
Global Context Shapes Kenya’s Prospects
KPMG Africa tax partner and head of private enterprise Sandeep Main highlighted that global economic conditions will continue to influence Kenya’s trajectory. World growth is expected to rise slightly to 2.7 percent, while Africa’s growth is projected to increase from 3.9 percent in 2025 to 4.1 percent by 2027.
He noted that US–China technology tensions and restructuring of global supply chains require Kenyan firms to rethink sourcing strategies and build resilience. Companies that diversify suppliers and markets are likely to be more competitive.
Capital Markets Underutilised
A major theme of the forum was the need for businesses to tap into Kenya’s capital markets to fund expansion. NSE Chief Executive Frank Mwiti expressed concern that many medium-sized firms still rely heavily on bank loans instead of issuing bonds or listing on the exchange.
Mwiti said transparency, good governance, and integrity were essential to attracting investors. He added that the NSE would work closely with Kepsa to help enterprises access affordable and long-term capital in 2026.
“Capital markets are not only for large corporations. Growing businesses can also benefit if they prepare properly and embrace disclosure requirements,” he said.
Geopolitical and ESG Pressures
The 2026 business environment is also being shaped by geopolitical volatility, including disputes over rare-earth exports, fluctuating interest rates, and policy changes by major central banks. These dynamics are encouraging market consolidation through technology-focused mergers and acquisitions.
At the same time, companies face rising compliance costs due to stricter Environmental, Social and Governance (ESG) standards and cross-border tax reforms. Firms seeking international funding are increasingly required to demonstrate sustainability practices, gender inclusion, and responsible supply chains.
Stability of the Shilling Boosts Confidence
One positive factor highlighted in the outlook is the relative stability of the Kenyan shilling after a period of sharp depreciation. A stable currency reduces import costs, eases pressure on debt servicing, and improves investor confidence.
Economists believe that if the shilling remains steady and inflation stays within target, consumer purchasing power will gradually recover, stimulating demand for housing, manufacturing goods, and financial services.
Path to Six Percent Growth
While the forum concluded that achieving six percent economic growth remains a work in progress, participants agreed that the foundations are being laid. Investments in energy, infrastructure, digital economy, and regional trade under the African Continental Free Trade Area (AfCFTA) could unlock faster expansion.
Experts urged the government to maintain policy consistency, deepen public–private partnerships, and reduce regulatory bottlenecks that slow investment approvals.
Outlook for Households and Jobs
For ordinary Kenyans, the projected rebound could translate into more employment opportunities, especially in construction, agribusiness, logistics, and the digital economy. However, analysts warned that inclusive growth will depend on targeted support for small and medium enterprises (SMEs), which employ the majority of workers.
Access to affordable credit, skills training, and predictable taxation were identified as critical enablers for SME growth in 2026.
Conclusion
Kenya enters 2026 with cautious optimism. The combination of easing inflation, a stable currency, resilient services, and recovering agriculture provides a supportive environment for business. Yet global uncertainties and domestic fiscal challenges mean that success will depend on agility, transparency, and innovation.
The message from Kepsa, NSE, and KPMG is clear: enterprises that embrace capital markets, technology, and sustainable practices will be best positioned to benefit from Kenya’s next phase of growth.