World Bank raises Kenya's 2026 growth forecast to 4.6%, sees deficit at 6.1% of GDP

The World Bank has raised its forecast for Kenya's economic growth in 2026 to 4.6 percent from 4.4 percent, Business Daily reported on 7 October, citing the Bank's latest economic update, published on Tuesday 6 October.

The Bank's October 2026 Macro Poverty Outlook for Kenya also projects inflation averaging 5.5 percent this year, a fiscal deficit of 6.1 percent of GDP and public debt of 71.1 percent of GDP. Business Daily reported that the earlier projections were 5 percent for inflation, 5.6 percent for the deficit and 70.3 percent for debt.

The Kenya sheet is part of the Bank's Macro Poverty Outlook for Sub-Saharan Africa, which covers 47 developing countries in the region. For Kenya it puts growth at 4.4 percent in 2027 and 4.8 percent in 2028, and says the economy grew 4.6 percent in 2025.

Growth accelerated to 5.3 percent in the first quarter of 2026 compared with a year earlier, driven by tourism, construction and manufacturing, the outlook says. It adds that the energy shock in the second quarter and the likelihood of erratic El Niño rainfall are expected to weigh on activity in 2026 and 2027, and that conflict in the Middle East is likely to dampen growth.

Business Daily reported that the Bank pointed to high-frequency data showing resilience, quoting its assessment that "employment continued to expand, and business confidence reached a three-and-a-half-year high."

Headline inflation averaged 5.3 percent in the first half of 2026 and rose to 6.6 percent in August compared with a year earlier, driven by higher energy and transport costs linked to elevated global oil prices, according to the outlook. The Bank said the Central Bank of Kenya's Monetary Policy Committee held the Central Bank Rate at 8.75 percent in August 2026, citing anchored inflation expectations.

The outlook says the current account deficit widened in the 12 months to June 2026, as goods imports grew 18 percent and goods exports 9.8 percent, driven by higher fuel costs and more imports of machinery and equipment for investment projects. It projects the current account deficit at 4.3 percent of GDP in 2026.

On the budget, the Bank said preliminary figures for the 2025/26 fiscal year show the deficit widened to 6.8 percent of GDP, against an original target of 4.7 percent. Revenue reached 17.3 percent of GDP against a 17.5 percent target, while spending rose to 24.1 percent against a target of 22.2 percent, largely financed domestically. The outlook's calendar-year fiscal figures, including the 6.1 percent deficit for 2026, are estimated from the corresponding fiscal years.

The outlook puts public debt at 70.6 percent of GDP in 2025, 56 percent of it domestic, and says Kenya remains at high risk of debt distress. Roughly one-third of revenues is absorbed by interest payments, it says.

Kenyan authorities have cut their own 2026 growth forecasts. Business Daily reported that the Central Bank of Kenya lowered its 2026 growth forecast by 0.4 percentage points to 4.9 percent from 5.3 percent, and that the National Treasury trimmed its projection from 5.3 percent to 5 percent.

On remittances, Business Daily quoted the Bank as saying: "While Kenya, Ethiopia and Nigeria account for some of the largest remittance receipts from the Gulf in absolute terms, the macroeconomic impact of a disruption would be greatest in smaller and more fragile economies such as the Gambia, South Sudan, Somalia, the Comoros and Lesotho." The paper reported that the Bank expects Kenya to be somewhat cushioned because remittances are a relatively small share of GDP.

The outlook puts Kenya's poverty rate at 43.3 percent in 2025, measured at US$3.00 a day in 2021 purchasing-power terms, a fall of only 2 percentage points in three years. It projects 43.0 percent in 2026.

The Bank called downside risks high. It named limited fiscal consolidation as the main domestic risk, with pressures from the electoral cycle potentially constraining spending discipline and limiting revenue reforms ahead of the 2027 elections.