NAIROBI, Kenya, July 10 – Kenya’s economic growth is expected to slow this year as the escalating conflict in the Middle East pushes up energy costs, disrupts trade and weakens private investment, according to the latest World Bank economic outlook.
The lender now projects Kenya’s Gross Domestic Product (GDP) to grow by 4.3 percent in 2026, down by 0.6 percentage points from its pre-conflict forecast issued in late 2025.
Growth is expected to improve slightly to 4.4 percent over the medium term, supported by easing monetary policy, exchange rate stability and a recovery in private sector credit.
The revised outlook highlights Kenya’s vulnerability to external shocks, given its heavy dependence on imported fuel, which leaves businesses and households exposed to rising global oil prices triggered by geopolitical tensions.
“Higher global energy prices and increased uncertainty are expected to raise production costs, weaken private investment growth, and weigh on household purchasing power through higher commodity prices and moderating remittance inflows.”
“Baseline assumptions include adequate agricultural harvests, easing monetary policy, exchange rate stability, and recovering private sector credit, which together are expected to support household incomes and investment activity.”
The World Bank said the conflict is affecting Kenya through several channels, including higher fuel prices, disrupted shipping routes, rising import costs and slower growth in diaspora remittances.
Manufacturers, transporters and exporters are expected to face higher fuel and freight costs, squeezing profit margins and increasing the cost of doing business.
Although inflation has remained relatively contained compared to previous global commodity shocks, the lender warned that prolonged increases in energy prices could reverse recent gains by driving up transport, food and production costs.
The report noted that Kenya’s economic momentum had already weakened before the latest geopolitical tensions emerged.
Real GDP growth slowed to 4.6 percent in 2025 from 4.7 percent in 2024 as household spending and private investment moderated despite lower inflation and a gradual recovery in credit.
Private consumption, which accounts for nearly three-quarters of Kenya’s GDP, grew by 4.7 percent in 2025, down from 6.2 percent a year earlier, while fixed investment growth eased to 5.6 percent from 6.4 percent. Public investment, however, increased as the government accelerated infrastructure projects.
Despite the downgraded outlook, the World Bank said Kenya’s macroeconomic fundamentals remain relatively resilient compared to many regional peers, supported by exchange rate stability, lower interest rates and stronger agricultural output.
However, it cautioned that significant downside risks remain, including a prolonged Middle East conflict, weaker revenue collection, rising public debt servicing costs and tighter global financial conditions, all of which could increase borrowing costs, crowd out private sector lending and slow the expected recovery in domestic demand.
