Kenya Economy Steady At 4.6pc, but Debt and Energy Costs Weigh On Outlook – EBRD
Kenya’s economy is projected to maintain steady but subdued growth in the near term, even as rising energy costs, tight fiscal space and global trade disruptions weigh on broader sub-Saharan Africa’s outlook, according to the European Bank for Reconstruction and Development (EBRD).
In its latest Regional Economic Prospects report, the European Bank for Reconstruction and Development forecasts Kenya’s growth to remain unchanged at 4.6 per cent in 2026 before edging up to 4.9 per cent in 2027, supported by resilience in construction, services and mining.
However, weaker performance in agriculture and manufacturing is expected to limit stronger expansion.
The Bank notes that inflationary pressures are gradually re-emerging in Kenya, with prices rising to 4.4 per cent in March 2026, driven largely by higher global oil prices that have pushed up transport and production costs.
Despite this, the shilling has remained broadly stable, helping cushion imported inflation pressures.
On the fiscal side, Kenya’s public finances remain under strain.
Public debt has climbed to about 70 per cent of GDP, with debt servicing consuming close to half of government revenues.
The fiscal deficit has widened to 6.1 per cent, underscoring limited fiscal space as the government balances development spending with rising repayment obligations.
The European Bank for Reconstruction and Development warns that higher energy costs, political uncertainty ahead of the 2027 elections, and delays in securing a new International Monetary Fund programme remain key downside risks to Kenya’s medium-term outlook.
“Inflation rose to 4.4 per cent in March 2026 as higher oil prices increased costs across the economy. The Kenyan shilling remained broadly stable.”
“Government finances remain under pressure. Public debt reached 70 per cent of GDP, while debt repayments absorbed around half of government revenues. The fiscal deficit widened to 6.1 per cent of GDP.”
Across sub-Saharan Africa, the European Bank for Reconstruction and Development projects regional growth to slow to 4.7 per cent in 2026 from 5.2 per cent in 2025, before a modest recovery to 4.8 per cent in 2027.
The slowdown is attributed to higher energy costs, trade disruptions linked to global geopolitical tensions, and weakening investment flows.
While commodity-producing economies continue to offer some resilience, the report notes that fiscal pressures, inflation and election-related spending cycles are expected to weigh on performance across several markets, including Nigeria, Senegal, Côte d’Ivoire and Benin.
By Capital FM.
