Kenya's economy grew an estimated 5.0% in 2025, up from 4.7% in 2024, but the 2026 growth projection has been revised down to 5.3% from 5.5%.
- •The Middle East conflict has disrupted supply chains, raised energy costs, widened the current account deficit, and weighed on key export sectors.
- •The estimate, disclosed by the Central Bank of Kenya at its April 8 Monetary Policy Committee meeting, is the strongest performance since 2023, supported by a rebound in the industrial sector, resilience in services, and stable agricultural growth.
- •The CBK's Q3 2025 GDP reading of 4.9% provided the base for the full-year estimate and leading indicators point to continued resilient performance in Q1 2026.
Business confidence remains broadly intact with the CBK's March 2026 CEO Survey and Market Perceptions Survey which recorded sustained optimism on business activity and growth prospects for the next 12 months.
Respondents flagged the Middle East conflict, high cost of doing business, and low consumer demand as the principal concerns.
Kenya's headline inflation edged up to 4.4% in March 2026 from 4.3% in February, remaining below the 5.0% midpoint of the 2.5%-7.5% target range. Core inflation held stable at 2.1% in both February and March, supported by lower prices of sugar and maize flour. Non-core inflation rose to 10.8% from 10.1%, driven by higher prices of tomatoes and Irish potatoes.
The CBK's March 2026 Agriculture Survey recorded a shift in sentiment, with most respondents now expecting upward inflation pressure from higher international oil prices, reversing the broadly stable expectations reported in February. Overall inflation is expected to remain within the target range in the near term, supported by favorable weather conditions and a broadly stable exchange rate, though the MPC flagged the need to monitor potential second-round effects of rising energy prices.
The external position has deteriorated with the current account deficit widening to an estimated 2.4% of GDP in the 12 months to February 2026, from 1.3% of GDP in the same period in 2025. Goods exports grew 8.1%, led by horticulture, tea, coffee, food and live animals, and machinery and transport equipment, but goods imports grew faster at 10.4%, driven by intermediate and capital goods. Services receipts fell 0.5% on lower transport income, while diaspora remittances grew a modest 1.9%.
The CBK revised its 2026 current account deficit projection sharply upward to 3.0% of GDP from a prior estimate of 2.2%, reflecting higher oil import costs, slower remittance growth, reduced services receipts, and lower export projections arising from the conflict. The deficit is expected to be fully financed by financial account inflows. Forex reserves stood at USD 13,354Mn, equivalent to 5.68 months of import cover.
Globally, growth previously projected to hold steady at 3.3% in 2026 is now expected to moderate as higher energy prices and elevated uncertainties from the Middle East conflict weigh on demand. Global inflation is expected to rise in 2026 on higher energy and fertilizer costs, with major central banks holding policy rates unchanged as they assess the conflict's impact on their own outlooks. International oil prices have risen sharply and remain volatile, with Murban crude climbing from USD 63 per barrel in December 2025 to nearly USD 98 by late March 2026. Food inflation has increased modestly, driven by higher edible oils and cereals prices.
The MPC noted the ongoing implementation of the FY2025/26 Government Budget and the planned fiscal consolidation strategy aimed at reducing debt vulnerabilities over the medium term.
