Diamond Trust Bank (DTB) expects Kenya’s economy to gather pace in 2026, forecasting growth of 5.3 per cent, up from an estimated 4.9 per cent last year, driven by firmer public expenditure, subdued inflation and strengthening local demand.
The projection aligns with the National Treasury’s outlook, which anticipates a rebound supported by a robust services industry and improved agricultural output. In its latest economic update, DTB said the near-term expansion would rest on recovering domestic consumption, stable prices, improved financial conditions and focused government outlays.
The lender added that renewed access to global capital markets and planned public-sector divestments should provide breathing room to finance development spending without sharply accelerating public debt, at least in the short run.
According to DTB, a combination of steady inflation, a gradually improving labour market and supportive monetary policy should translate into rising household incomes and stronger consumer spending. In December, the Central Bank of Kenya trimmed its benchmark rate by 25 basis points to 9 per cent, marking the ninth straight reduction as it sought to stimulate private sector lending and maintain macroeconomic stability amid easing price pressures. Inflation edged down to 4.4 per cent in January 2026 from 4.5 per cent a month earlier.
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A survey by the central bank indicates that players in the agricultural sector expect better performance this year, buoyed by agro-processing activity and continued government support to enhance productivity. Fresh infrastructure spending is also expected to bolster output. The government plans to ramp up road expenditure to more than Sh500 billion in the 2026-27 financial year, partly financed by proceeds from the Safaricom divestment and the anticipated privatisation of Kenya Pipeline, alongside efforts to clear pending bills and fund affordable housing projects.
DTB cautioned, however, that the recovery is unlikely to be evenly distributed. Higher-income households are poised to lead consumption, supported by gains in equity and bond markets. Meanwhile, lower and middle-income consumers are expected to remain restrained, focusing on essentials and value for money even as the broader economy gathers momentum.
