The World Bank has warned that rising global oil prices caused by the conflict in the Middle East could push between one million and 2.4 million more Kenyans below the international poverty line this year, as higher fuel costs increase the cost of living and doing business.
In its latest Kenya Economic Update, the lender said the increase in fuel prices is expected to drive up transport and food costs, reduce household purchasing power and raise operating expenses for businesses, threatening the country’s recent economic recovery.
The World Bank also lowered Kenya’s economic growth forecast for 2026 to 4.3 percent, down from its earlier projection, citing weaker private sector investment, rising production costs and slower consumer spending.
According to the report, Kenya’s economy grew by 4.6 percent in 2025, slightly lower than the 4.7 percent recorded in 2024.
The lender noted that although employment increased by 4 percent in 2025, the labour market remains heavily dominated by informal jobs, which account for 83.8 percent of total employment.
The report shows that businesses created about 54,500 new formal jobs during the year, mainly in the manufacturing, financial services and electricity sectors.
However, the World Bank said the increase in formal employment remains too small to significantly improve incomes, productivity and overall living standards.
Despite the weaker economic outlook, the lender said Kenya’s macroeconomic fundamentals remain stable.
It attributed the resilience to low and stable inflation, a relatively stable Kenyan shilling and improved access to private sector credit following a series of interest rate cuts by the Central Bank of Kenya.
The World Bank, however, urged the government to accelerate fiscal reforms aimed at strengthening public finances and improving the efficiency of public spending.
It also called for policies that encourage private sector investment and create more productive formal jobs to support sustainable and inclusive economic growth.
The lender said strengthening the private sector and improving employment opportunities will be critical in cushioning households from rising living costs and sustaining Kenya’s long-term economic recovery.
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