CBK projects faster economic growth in 2027

The Central Bank of Kenya has upgraded its 2026 growth forecast to 5.0 percent, with further expansion projected to 5.3 percent in 2027, primarily driven by industry and services. Speaking on October 8, following the Monetary Policy Committee's recent decision to retain the Central Bank Rate at 8.75 percent, Governor Kamau Thugge highlighted the acceleration in economic growth, reaching 5.3 percent in the first quarter of 2026.

This growth is attributed to a broad-based expansion across various sectors, with notable gains in construction, infrastructure, trade, and services, coupled with improved access to credit for businesses and households. The CBK anticipates stronger industrial activity, particularly through construction linked to the affordable housing program, ongoing infrastructure developments, and public-private partnerships.

Services are expected to grow by 5.6 percent in 2026, increasing to 5.9 percent in 2027, largely due to digitization efforts. Meanwhile, agriculture growth is projected at 3.0 percent in 2026 and 4.3 percent in 2027, contingent on favorable weather conditions. The bank also observed a positive trend in private sector credit growth, which surged to 10.6 percent in September 2026 from a contraction of 2.9 percent in January 2025.

Lending rates have fallen, while credit uptake has improved across key sectors such as trade, building and construction, agriculture, finance, and consumer durables. Despite these optimistic projections, the CBK cautioned that external factors could pose challenges to the economy, including global inflation pressures driven by rising energy and food prices, as well as geopolitical tensions.

The current account deficit is projected to widen to 3.2 percent of GDP in 2026, primarily due to increased oil imports and reduced remittance inflows. However, the deficit is expected to be manageable, resulting in a balance of payments surplus. Foreign exchange reserves are currently at 14.7 billion US dollars, sufficient to cover imports for nearly six months.

The bank also noted a decline in non-performing loans to 13.9 percent in September, reflecting improved creditworthiness. However, the committee identified potential risks, such as the prolonged Middle East conflict, trade policy uncertainties, and the Russia-Ukraine war, alongside possible El Niño weather impacts. The Monetary Policy Committee is scheduled to convene again in December to reassess the economic outlook.