Kenya’s private sector is expecting the economy to grow at a modest pace in 2026, but businesses are warning that high public debt, rising fuel and energy costs, inflation and global tensions could slow the recovery.
The outlook is contained in a Central Bank of Kenya (CBK) Market Perceptions Survey, which shows that businesses remain generally positive about the economy over the next 12 months, with lower lending rates, stronger private-sector credit, recovering tourism and construction activity and stable economic conditions expected to support growth.
The survey was conducted ahead of the Monetary Policy Committee meeting and sought the views of banks, microfinance institutions and non-bank private-sector firms on economic activity, inflation, credit, employment and the business environment.
CBK targeted 400 firms, made up of 37 commercial banks, 14 microfinance banks and 349 non-bank private-sector firms. A total of 249 institutions responded, giving the survey a 62 percent response rate.
“Respondents expect economic growth to improve modestly in 2026 compared to 2025, supported by stronger private sector credit, lower lending rates, rising consumer demand, and relatively stable macroeconomic conditions.”
Businesses expect economic activity between August and October to remain moderate, with 62 percent of respondents predicting moderate levels of activity during the period.
Agriculture is expected to continue playing a key role in the economy, supported by above-normal rainfall and government fertilizer subsidies. Businesses also expect recovering tourism, trade and ICT activity to lift demand, alongside lower borrowing costs and continued investment by both the government and private sector.
However, the survey points to several pressures that could weaken the expected growth.
Inflation and weaker consumer spending emerged as some of the biggest concerns, with 71 percent of respondents saying the two factors could reduce demand for goods and services and affect economic activity.
High fuel and energy prices were cited by 64.5 percent of respondents as another major risk. Businesses also raised concerns over geopolitical tensions, with 50 percent pointing to conflicts in the Middle East and their possible impact on energy prices, transport costs and global supply chains.
Despite these concerns, private-sector lending is expected to grow in 2026.
Banks project credit growth of 9.9 percent by December, slightly higher than the 9.6 percent forecast in the May survey.
Lower lending rates following monetary policy easing are expected to play a major role in driving credit growth. Banks also pointed to digital financial innovation, expansion of strategic lending and risk-based pricing as factors that could support borrowing.
A recovery in manufacturing, construction and hospitality is also expected to create greater demand for credit as businesses increase activity.
The expected economic improvement, however, is not likely to translate into a major rise in employment.
“Respondents anticipate employment levels to remain broadly stable in 2026 compared to 2025, as firms increasingly adopt digitization, automation, and resource optimization thereby reducing the need for large scale hiring.”
Businesses expect most recruitment to focus on replacing workers who leave, converting some contract positions into permanent employment and filling specialised roles.
Demand is expected to be strongest for skills in areas such as business development and digital technologies.
On inflation, businesses expect prices to rise slightly in the short term but remain within the CBK’s target range.
About 90 percent of respondents identified higher fuel and energy prices as the main source of inflationary pressure. Food prices and rising operating costs were also listed among the factors likely to push prices higher.
The survey further found that businesses remain concerned about the country's debt position. High public debt, the cost of servicing the debt and increased domestic borrowing by the government were identified as factors that could limit private-sector investment.
To improve the business environment, respondents called for reduced excessive domestic borrowing and faster payment of government pending bills.
They also want predictable monetary policy and simpler regulations to make it easier for businesses to plan and invest.
Businesses further recommended greater use of public-private partnerships and increased government spending on development projects that offer stronger economic returns.
Overall, the survey shows a private sector that expects Kenya’s economy to improve in 2026, but with growth still exposed to pressure from household spending, energy costs, public debt and international events.