Kenya: Govt Cuts 2026 Economic Growth Forecast to 5pc

Nairobi — The government has revised Kenya's 2026 economic growth forecast downward to 5 percent from the earlier projection of 5.3 percent, citing the impact of the Middle East conflict on global energy markets and rising fuel costs.

Presenting the 2026/27 Budget in Parliament, Treasury Cabinet Secretary John Mbadi said higher energy prices triggered by the conflict involving Iran, Israel and the United States are expected to weigh on economic activity, particularly in fuel-dependent sectors such as transport, manufacturing and logistics.

The Treasury had initially projected the economy to expand by 5.3 percent in 2026, supported by strong agricultural performance, a recovery in the services sector and the implementation of reforms under the government's Bottom-Up Economic Transformation Agenda (BETA).

However, the latest outlook reflects growing concerns over global economic uncertainty and the effects of elevated oil prices on domestic inflation and business costs.

Despite the downgrade, Mbadi said the economy is expected to recover, with growth projected to rebound to 5.2 percent in 2027.

The revised forecast comes as inflationary pressures continue to build. Kenya's annual inflation rate rose to 6.7 percent in May from 5.6 percent in April, driven mainly by higher food, transport and energy costs.

The impact has been felt locally through rising fuel prices. In April, the price of a litre of petrol increased from Sh178.28 to Sh206.97, before climbing further to Sh214.25 in the latest fuel review.

Higher fuel costs have raised transportation, production and distribution expenses, contributing to broader inflationary pressures and increasing the cost of doing business across the economy.

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