CBK raises econoic growth forecast to 5% as inflation risks remain

The Central Bank of Kenya (CBK) has raised its economic growth forecast for 2026 to 5% from the previous 4.9%, despite global oil price volatility. Governor Dr Kamau Thugge attributed the upward revision to stronger performances in the industry and services sectors. The growth projection for 2026 surpasses the 4.6% growth seen in 2025. Agriculture is anticipated to expand by 3%, industry by 5.2%, and services by 5.6% this year. The economy is projected to grow by 5.3% next year.

Dr Thugge noted during a recent statement that high energy costs continue to affect food inflation, although subsidies and reduced Value Added Tax on fuel have helped to alleviate some pressure. Despite the inflation spike, the overall inflation rate rose from 6.6% in August to 6.8% in September. The increase can be primarily attributed to rising milk prices, which contributed to a 1 percentage point rise in inflation. If milk prices had stayed stable, inflation would have been 6.5% instead of 6.8% in September.

Looking ahead, the CBK expects overall inflation to peak at 7.2% by December before settling within a midpoint target range of 5% in May.