Kenya’s economy is showing signs of stability, supported by strong monetary policies and recovering private sector, World Bank report reveals.
The World Bank’s latest Kenya Economic Update shows that inflation is expected to remain steady at 5.0 percent in 2026, the same as projected for 2025 and 2027, and slightly higher than the 4.5 percent recorded in 2024.
The Kenya National Bureau of Statistics (KNBS) December report showed a steady inflation rate of 4.5 percent, matching the Consumer Price Index (CPI) recorded in November 2025.
“The Consumer Price Index (CPI) was 4.5 per cent in December 2025. This implies that the general price level was 4.5 per cent higher in December 2025 than it was in December 2024,” read part of the report.
World Bank Projects 4.9 Percent GDP Growth for Kenya Amid Stable Inflation
The World Bank observed that although Kenya’s GDP growth slowed to 4.7 percent in 2024, it gained momentum in early 2025, supported by looser monetary policy and increased public investment.
Real GDP expanded by 4.9 percent in the first quarter of 2025 and reached 5.0 percent in the second quarter.
The World Bank noted that a stable macroeconomic environment and a gradual revival in private sector activity are likely to sustain average GDP growth of about 4.9 percent over the 2025–2027 period.
“Private sector credit is recovering, reflecting a more accommodative monetary policy. Real GDP growth is projected at 4.9 percent on average for 2025-2027; however, the outlook is subject to elevated risks,” read part of the report.
The bank stated that the recovery has been led largely by improved performance in the construction industry, stimulated by lower interest rates, expanded public investment, and the payment of long-outstanding road arrears.
Also Read: Why Kenya’s Year-on-Year Inflation Dropped to 3.5%
CBK Perception on 2026 Outlook
The Central Bank of Kenya (CBK) projected a stronger economic outlook for 2026, anchored on easing inflationary pressures and a sustained recovery in key sectors of the economy.
According to the CBK’s outlook, overall inflation is expected to remain below the midpoint of the target range of 5±2.5 percent in the near term, supported by lower prices of processed food, stable energy costs, and continued exchange rate stability.
“Inflation in some major economies has eased modestly in recent months but is still above target mainly reflecting the stickiness in core inflation. Global inflation is projected to decline in 2025 and 2026, mainly driven by lower energy prices, and reduced global demand,” read part of the statement.
Also Read: CBK Predicts Decline in Kenya’s Inflation Rates
CBK expects Kenya’s economy to build on the resilience recorded in the first half of 2025, when real GDP growth averaged 4.9 percent, driven by a rebound in industrial activity, steady agricultural output, and the continued strength of the services sector.
Looking ahead, the bank stated that the economic growth is projected to accelerate to 5.5 percent in 2026, reflecting further recovery in the industrial sector alongside sustained performance in agriculture and services.
However, the Bank cautioned that the outlook remains subject to risks, including adverse weather conditions, global trade policy uncertainties, and heightened geopolitical tensions, which could weigh on growth momentum and price stability.
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