Kenya Economy Steady at 4.6pc, But Debt and Energy Costs Weigh on Outlook – EBRD
The European Bank for Reconstruction and Development (EBRD) projects Kenya’s economy to grow steadily at 4.6% in 2026 before rising to 4.9% in 2027, but rising energy costs, debt pressures, and political uncertainty pose risks. Public debt now stands at 70% of GDP, with debt servicing consuming nearly half of government revenues, while inflation reached 4.4% in March 2026 due to higher oil prices.
Kenya’s economy is expected to maintain steady but modest growth in the near term, according to the European Bank for Reconstruction and Development (EBRD). The bank forecasts growth at 4.6% in 2026, unchanged from previous projections, before edging up to 4.9% in 2027. This growth is supported by resilience in construction, services, and mining sectors, though weaker performance in agriculture and manufacturing will limit stronger expansion. Inflationary pressures are re-emerging, with prices rising to 4.4% in March 2026, driven primarily by higher global oil prices. These increases have pushed up transport and production costs across the economy. However, the Kenyan shilling has remained stable, helping to mitigate some of the imported inflation pressures. Public finances in Kenya face significant strain, with public debt climbing to approximately 70% of GDP. Debt servicing now consumes close to half of government revenues, while the fiscal deficit has widened to 6.1% of GDP. This limits the government’s fiscal space, forcing a balance between development spending and rising repayment obligations. The EBRD highlights key risks to Kenya’s medium-term outlook, including higher energy costs, political uncertainty ahead of the 2027 elections, and delays in securing a new International Monetary Fund program. These factors could further weigh on economic stability and growth prospects. Across sub-Saharan Africa, the EBRD projects regional growth to slow to 4.7% in 2026 from 5.2% in 2025, before a modest recovery to 4.8% in 2027. The slowdown is attributed to higher energy costs, trade disruptions linked to global geopolitical tensions, and weakening investment flows. Fiscal pressures, inflation, and election-related spending cycles are expected to impact performance in several markets, including Nigeria, Senegal, Côte d’Ivoire, and Benin.
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