Kenya’s economy is expected to expand by 4.3% this year and 4.4% in 2027, according to a World Bank report released Thursday.
The 2026 forecast marks a 0.6 percentage point reduction from the lender’s November predictions. Economists attribute this downgrade directly to global trade disruptions caused by the U.S.-Israeli war on Iran.
“In the short term, higher global energy prices and increased uncertainty are expected to raise production costs,” the bank stated in its latest economic update. The conflict has heavily disrupted shipping around the Strait of Hormuz.
The Washington-based lender warned that rising commodity costs heavily impact households. The crisis threatens to push an additional 1 million to 2.4 million Kenyans below the $3 per day poverty line.
This decelerated pace follows a 4.6% growth rate recorded last year. The downgraded 4.3% expansion projection represents Kenya’s weakest economic performance since the coronavirus pandemic slowdown of 2020.
Compounding international constraints, domestic private investment is slowing down. Investors are increasingly hesitant to commit capital ahead of Kenya’s upcoming general elections scheduled for August 2027.
“Approaching elections may delay private investment decisions [and] increase policy uncertainty,” the World Bank noted, warning that pre-election spending pressures could also weaken fiscal discipline.
However, adequate agricultural harvests, a stable shilling exchange rate, and easing monetary policy are preventing a sharper downturn. This follows a $750 million budget-support loan approved by the World Bank last month.
