Kenyan firms are entering 2026 with optimism about business growth, but deep unease over the country’s rising political risk.
Even amid the uncertainty, business sentiment is turning cautiously upbeat. The Central Bank of Kenya (CBK) Market Perceptions Survey for September 2025 shows sustained optimism among banks and private firms about the country’s economic prospects over the next 12 months.
Respondents cited a stable macroeconomic environment, easing interest rates, and a rebound in agriculture and services as the main drivers of growth.
The survey found that most respondents expect economic activity to strengthen in the final quarter of 2025, boosted by festive season demand, tourism recovery, and improved liquidity in the credit market. Firms also project higher private sector credit growth, supported by declining lending rates and steady inflation.
“Respondents expect improved economic growth in 2025 relative to 2024, driven by better agricultural performance, a resilient services sector and stable macroeconomic environment,” the CBK report noted.
Banks forecast rising demand for loans in trade, construction and real estate, while non-bank firms expect government infrastructure spending, including affordable housing and digital transformation projects, to spur expansion.
Inflation expectations remain anchored within the CBK’s 2.5–7.5 per cent target range, supported by stable fuel prices, a strong shilling, and better food supply from favourable rains. Respondents also expect the exchange rate to stay largely stable, helped by resilient foreign inflows and diaspora remittances.
“Whether Kenya sustains its reform momentum and macroeconomic stability will determine if 2026 becomes a year of sustained recovery or a pre-election gamble for investors."
At the same time, the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rose to 51.9 in September, signalling the first improvement in business conditions since April. The upturn was driven by renewed growth in output, new orders and employment, with job creation in agriculture and manufacturing reaching the fastest pace since mid-2023.
“Business conditions expanded in September, implying the start of a recovery after disruptions that followed protests in Q2,” said Christopher Legilisho, Economist at Standard Bank. “Business prospects for the upcoming year were still strong, albeit far off from historical trends.”
The PMI also showed supply bottlenecks easing, with firms reporting the strongest improvement in delivery times in four years and moderating input cost pressures. Businesses raised prices modestly, citing higher taxes and fuel costs, but inflation overall remained soft.
The Prevailing Risks
Still, optimism is tempered by persistent challenges, high operational costs, muted consumer demand, and frequent tax and regulatory changes that continue to test business confidence. The CBK survey also cited fiscal strain, geopolitical tensions and climate risks among the top threats to Kenya’s economic outlook.
These economic crosscurrents unfold as the country navigates its most uncertain political moment in years. The death of opposition leader Raila Odinga in October has left a leadership vacuum, heightening speculation about the shape of the opposition, and with it Kenya's larger political environment, ahead of the 2027 elections.
“Odinga’s death leaves few experienced politicians to fill the opposition void, and we should expect fragmentation of ODM and increasing tension as 2027 approaches,” says Declan Galvin, Managing Director of Exigent Risk Advisory.
Analysts warn that youth-led protests, digital disinformation, and early election politicking could unsettle investor sentiment going into 2026. Nearly half of Kenyan firms have already reported losses linked to protest-related disruptions this year.
The underlying fundamentals remain resilient, inflation is easing, farm output is improving, and credit conditions are loosening.
“Whether Kenya sustains its reform momentum and macroeconomic stability will determine if 2026 becomes a year of sustained recovery or a pre-election gamble for investors.” Gavin adds.
