Nairobi, November 4, 2026 – Kenya’s economy has remained resilient, with growth picking up to 5.2 % in the first half of 2026, from 4.6% in 2025. Stronger activity in industry and services drove the gain. However, growth is expected to moderate in the second half, bringing full-year growth in 2026 to 4.6 %.
The World Bank Group’s 34th Kenya Economic Update launched today shows steady growth and solid buffers, however, growth is still much lower than it could be. The report finds that addressing governance constraints could lift GDP by up to 20 %by 2035. Doing so could accelerate economic growth and support additional better jobs.
- Kenya’s resilience gives it a strong foundation, but resilience alone will not deliver the growth and jobs Kenyans need. Better governance is an economic imperative. Improving governance can support fiscal sustainability, attract investment and enable faster growth and more and better jobs.Qimiao FanWorld Bank Division Director for Kenya, Rwanda, Somalia and Uganda
Several economic indicators remain strong. Foreign exchange reserves stand at about US$14.7 billion, or around 5.9 months of import cover. Inflation remains within the Central Bank’s target range, despite upward pressure from food and energy prices. Employment is growing, but 83.8 percent of jobs remain informal, often with lower pay and lower productivity. The challenge is to create both more and better jobs.
Fiscal pressure, however, remains significant. Last fiscal year’s deficit reached 6.8 percent of GDP against a 4.7% target, largely driven by higher spending, including supplementary budgets. Public debt stood at 72.3 % of GDP in August 2026, while interest payments absorb about one-third of government revenue, limiting resources for essential services and development. In the absence of ambitious reforms, the economy is expected to grow by 4.4% in 2027 and 4.8% in 2028, subject to downside risks such as the current conflict in the Middle East and its impact on fuel and shipping costs and weather-related shocks.
Special focus: Governance, Growth and Jobs
This edition’s special focus examines how governance shapes Kenya’s economic performance. It finds that on several dimensions, Kenya has strong foundations: a dynamic private sector, an enterprising young population, and a solid legal and institutional framework. Yet, there is considerable room to strengthen implementation, improve integrity, and reduce governance constraints impacting formal and informal businesses.
Governance constraints carry measurable costs:
- Public finances: Corruption and collusion impacting spending efficiency as well as revenue collection are estimated to account for up to 2 percentage points of GDP of annual fiscal deficits, reducing space for priority spending and raising the need for further revenue mobilization.
- Cost of services and inputs: Governance challenges contribute to a higher cost of backbone industries and services – power, logistics, and land – through nontransparent contracts, numerous inspections, and serious integrity gaps in land administration – driving up costs and creating uncertainty for the private sector.
- Investment: 39 % of firms identify corruption as a major constraint. Medium-sized firms, which have the potential to become bigger employers, are particularly affected, with 48% reporting a need for giving gifts to “get things done”.
- Wages: Governance weaknesses also reduce earnings, especially of exposed informal workers facing frequent inspections, threats and bribe requestsby the police and municipal officials.
Implementing ambitious governance reforms could raise GDP, support 7.7 milion of additional and better jobs, and lower the public debt-to-GDP ratio.
Reform priorities include greater fiscal discipline, greater transparency in public procurement and beneficial ownership reporting, regulatory streamlining, simplification and transparency to reduce opportunities for bribe demands, including improvements in tax and customs administration. Better governance and public resource management can strengthen fiscal sustainability, improve the business environment, and turn Kenya’s resilience into faster growth and more and better jobs.
