Treasury Lowers 2026 Economic Growth Projection from 5.3% to 5%

The National Treasury has projected that Kenya’s economy will grow by 5 percent in 2026 despite ongoing global economic uncertainty, supported by lower inflation, continued economic reforms and increased private sector investment.

Treasury Principal Secretary Chris Kiptoo said the economy is expected to expand further to 5.1 percent in 2027 and 5.2 percent in 2028.

However, the Treasury has revised its 2026 growth forecast down from the earlier projection of 5.3 percent, citing the impact of the conflict in the Middle East, which has pushed up global fuel prices, disrupted supply chains and weakened external demand.

Speaking during the launch of the 2027/28 budget preparation process, Kiptoo said Kenya’s economy remains resilient, with agriculture, financial services, manufacturing, construction and tourism expected to remain the key drivers of growth.

He noted that the economy expanded by 5.3 percent in the first quarter of 2026, supported by strong performance across several sectors.

The accommodation and food services sector recorded the fastest growth at 14.7 percent, driven by rising international tourist arrivals.

Manufacturing also posted its strongest growth in recent years, supported by increased production of cement, sugar, processed milk, soft drinks and locally assembled motor vehicles.

Kiptoo said Kenya’s macroeconomic environment has continued to improve following a series of monetary policy measures aimed at supporting economic activity.

He noted that the Central Bank Rate has declined to 8.75 percent from 13 percent in 2024, leading to lower commercial lending rates and increased access to credit for businesses.

Private sector credit growth has also accelerated to 9.3 percent, with agriculture, trade and construction among the sectors recording the strongest growth in borrowing.

The Treasury further said Kenya’s external position has strengthened, supported by higher export earnings, resilient diaspora remittances and strong foreign exchange reserves.

According to Kiptoo, the country’s foreign exchange reserves currently stand at about $14.1 billion, equivalent to six months of import cover, providing a strong buffer against external economic shocks.