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KCB advisory unit sees Kenya economic growth edging up to 5pc in 2026
KCB Bank Kenya, Director, Digital Financial Services Angela Mwirigi (left) and Visa East Africa, Vice-President and General Manager Chad Pollock on stage during the KCB and Visa partnership launch of a Business Credit Card Solution to Empower Kenyan SME’s on February 10, 2026 at the Safari Park Hotel.
Photo credit: Francis Nderitu | Nation Media Group
Kenya’s economy is projected to grow by five percent in 2026 on stable inflation, lower interest rates, improved access to credit, and a stable shilling, analysts at KCB Investment Bank (KCBIB) said on Tuesday.
The rate of expansion of gross domestic product (GDP)— a measure of all economic activities by the government, companies, and individuals— will be marginally faster than the estimated 4.9 percent in 2025.
The analysts at KCB Group’s investment banking unit said the economy is transitioning from stabilisation to cautious recovery, supported by stronger macro-economic fundamentals, but warned that high debt levels and fiscal pressures will continue to limit faster growth.
“Kenya enters 2026 with improved macro stability, but fiscal discipline will determine how far the recovery can run,” they wrote in their 2025 Economic Review and 2026 Outlook report. “2025 was about stabilisation, while 2026 is about controlled optimism, but with fiscal handcuffs on.”
The economic outlook by the KCB unit mirrors that of the World Bank at 4.9 percent, but is lower than the 5.3 percent projected by Diamond Trust Bank’s research analysts.
KCBIB, the brokerage and advisory services arm for KCB, said inflation stability would continue to be a key driver of growth.
Headline inflation— a measure of average prices of goods and services compared with the previous year— averaged 4.1 percent in 2025, remaining within the Central Bank of Kenya’s target range of 2.5 to 7.5 percent, and easing pressure on household budgets and business input costs.
Stable prices, together with a relatively steady shilling against the US dollar and adequate foreign exchange reserves(currently at nearly $12.39 billion or 5.3 months of import cover), have allowed the Central Bank of Kenya to cut the key lending rate to support growth, improve liquidity conditions, and restore confidence across financial markets and the broader economy.
The CBK’s Monetary Policy Committee cut its policy rate from 13 percent in mid-2024 to 8.75 percent on February 10,2026 , marking a 10th consecutive cut—a move KCBIB said has begun to feed through to lower lending rates and improved access to credit.
Private sector credit growth recovered to five percent year-on-year at the close of 2025, the analysts say.
The improving credit conditions have been supported by reduced borrowing costs, improved policy transmission, and the adoption of risk-based pricing frameworks, while asset quality improved modestly as non-performing loans edged lower to 16.4 percent from recent peaks of 17.6 percent in November 2024.
The growth in 2025 was broad-based, supported by improved performance in agriculture, a rebound in construction, strong growth in mining, and steady expansion across services, including trade, transport, accommodation, finance, and real estate.
Looking ahead to 2026, the analysts expect growth to remain supported by accommodative monetary policy, easing yields, and stable foreign exchange conditions, with inflation projected to stay anchored at around 4.5 percent.
KCBIB cautioned that the scope for further interest-rate cuts is limited, with monetary policy expected to shift to a neutral-to-accommodative stance as authorities balance growth support with fiscal sustainability and external stability.
“Short-term rates are likely to trend lower, with the CBR expected to close 2026 in the 8.0 percent to 8.5 percent range. Investor preference is expected to shift toward longer-dated instruments, which offer more attractive risk-adjusted returns and duration benefits,” they wrote in the report.
