Kenya’s economic growth is expected to slow in 2026 as rising energy prices, higher production costs and global uncertainty weigh on East Africa’s largest economy, according to the World Bank.
The World Bank forecasts that Kenya’s gross domestic product (GDP) will grow by 4.3% in 2026 and 4.4% in 2027. The projection for this year has been revised downward by 0.6 percentage points compared with the bank’s November forecast, following the economic impact of the U.S.-Israeli conflict involving Iran, which has contributed to higher energy prices and disruptions to global shipping routes.
Kenya’s economy expanded by 4.6% in 2024. However, the country’s Finance Ministry remains more optimistic, projecting economic growth of 5.0% in 2026 and 5.2% in 2027.
Higher Energy Costs Put Pressure on Businesses and Households
The World Bank said Kenya’s short-term economic outlook is being affected by higher global energy prices and increased uncertainty.
“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 bank said in its latest economic update.
Despite these challenges, the World Bank identified several factors that could help support Kenya’s economy, including strong agricultural harvests, easing monetary policy, exchange-rate stability and a recovery in private-sector credit.
Middle East Conflict Raises Poverty Concerns
Kenya’s economy has expanded steadily in recent years, growing at an average rate of around 5% annually. However, the country faces new external risks linked to instability in the Middle East.
The World Bank warned that higher fuel prices and increased costs for fuel-dependent goods could raise living expenses and worsen economic conditions for millions of Kenyans.
The institution estimates that the impact of the conflict could increase Kenya’s poverty rate by 2 to 4.5 percentage points, potentially pushing between 1 million and 2.4 million additional people below the $3-per-day poverty line.
Kenya remains vulnerable to external shocks due to its dependence on imported fuel and exposure to global commodity price fluctuations.
2027 Elections Add Economic Uncertainty
Beyond international pressures, the World Bank highlighted domestic political risks ahead of Kenya’s 2027 general elections.
The country is scheduled to hold presidential and parliamentary elections in August 2027. The bank warned that the electoral cycle could delay investment decisions and slow economic reforms.
“Approaching elections may delay private investment decisions, increase policy uncertainty and slow implementation of structural reforms,” the World Bank said.
The institution also cautioned that increased government spending ahead of elections could weaken fiscal discipline and delay efforts to consolidate public finances.
“Pre-election spending pressures could weaken fiscal discipline and delay planned consolidation efforts, while heightened political tensions could adversely affect business and consumer confidence,” the bank added.
World Bank Supports Kenya’s Economic Reforms
Despite the challenges, Kenya continues to receive international financial support.
In late June, the World Bank approved a $750 million budget-support loan and a separate $500 million sustainability-linked financing facility.
The funding aims to reduce Kenya’s reliance on expensive domestic borrowing and strengthen the government’s economic reform agenda.
For Kenya, the challenge ahead will be maintaining economic growth while managing global shocks, protecting household incomes and preserving investor confidence ahead of the 2027 elections.
