The World Bank Group has revised Kenya’s 2026 growth outlook upwards to 4.6 percent from 4.4 percent previously, signalling resilience in domestic output amid shocks from the Middle East conflict.
The multilateral lender had previously trimmed its growth outlook for Kenya from 5.3 percent to 4.4 percent in June, after initially projecting 4.9 percent in April, at the onset of the Israel -US war on Iran, with its immediate impact including higher oil prices and a squeeze in inflows like diaspora remittances.
The World Bank has attributed the slight expected improvement in economic output to high-frequency data which show resilience in long-term growth prospects amid near-term shocks. The upward revision of Kenya’s growth aligns with projections on an overall lift in output across the Sub-Saharan African region in the World Bank’s latest economic update published on Tuesday.
“The softening in private sector activity in August, reflected persistent supply constraints, elevated input costs and tight cash flow conditions, which constrained firms’ ability to translate stronger demand into higher output,” the World Bank said in its assessment of the monthly Stanbic Bank Purchasing Managers’ Index (PMI) report.
“Nevertheless, employment continued to expand, and business confidence reached a three-and-a-half-year high, suggesting that underlying demand remains resilient despite near-term operational and cost pressures.”
The Kenyan economy opened to a strong first quarter ended March 2026, before absorbing the impact of the Middle East war which started on February 28, with growth accelerating to 5.3 percent from four percent in the comparable first quarter of 2025.
The expansion was supported by stronger domestic demand, easing financial conditions, robust tourism activity and a recovery in industrial production.
The economy has, however, seen more downside risks since March, including a pickup in inflation from elevated global oil prices, a wider current account deficit from a spike in fuel imports and a slowdown in diaspora remittances. The headwinds saw significant revisions to the country’s economic output forecast this year by authorities, including the National Treasury and the Central Bank of Kenya (CBK).
The CBK cut its economic growth forecast for 2026 by 0.4 percentage points to 4.9 percent, down from 5.3 percent previously, citing the implications of the war. The apex bank projected that the manufacturing and ICT sectors would bear the brunt of the US-Israel war on Iran. The National Treasury, for its part, trimmed its 2026 growth projection from an earlier 5.3 per-cent to a flat five percent.
The World Bank expects Kenya to be slightly cushioned from setbacks like the slowdown in diaspora remittances given the relatively smaller share of these inflows as a percentage of GDP.
“While Kenya, Ethiopia and Nigeria account for some of the largest remittance receipts from the Gulf in absolute terms, the macroeconomic impact of a disruption would be greatest in smaller and more fragile economies such as the Gambia, South Sudan, Somalia, the Comoros and Lesotho, where remittances constitute a significant share of GDP and an important source of household income, foreign exchange and external financing,” the World Bank added.
The Kenyan economy grew at a slower rate of 4.6 percent in 2025 from 4.7 percent a year earlier on lower-than-expected output from the agriculture sector, which represents one-fifth of gross domestic product.
The World Bank further expects inflation to quicken, averaging 5.5 percent in 2026 from an earlier projection of five percent, reflecting the pickup in consumer prices from higher global oil prices.
The budget deficit is also expected to expand to 6.1 percent of GDP from an earlier 5.6 percent projection, while debt is seen reaching 71.1 percent of GDP from an earlier 70.3 percent outlook.
