IMF forecasts 4.7% Kenya economic growth in 2027

Kenya's economy is expected to grow by 4.7% in 2027, up from 4.5% this year, while average annual inflation falls from around 6% to 5%, according to the International Monetary Fund (IMF).

The projections, published in the IMF's October 2026 World Economic Outlook, suggest Kenya could enter next year with slightly stronger economic growth and slower increases in consumer prices. However, the Central Bank of Kenya (CBK) is more optimistic, forecasting growth of 5% in 2026 and 5.3% in 2027, supported by activity in agriculture, industry and services.

CBK Governor Kamau Thugge defended the bank's higher projections in an October 16 interview with Reuters, saying, "It's likely our projection is closer to the truth than the IMF one." Both institutions expect Kenya's economy to expand, but they differ on how quickly that growth will happen.

Inflation is expected to ease, but prices are still rising

The IMF's inflation forecast offers some hope for households facing higher living costs, although the latest figures show that price pressures have yet to ease. According to the Kenya National Bureau of Statistics, annual inflation rose to 6.8% in September from 6.6% in August. Food and non-alcoholic beverages were 9.5% more expensive than a year earlier, while transport costs had increased by 15.6%.

Even if inflation falls to the IMF's projected 5% next year, Kenyans should not necessarily expect prices to come down. A lower inflation rate means the overall cost of goods and services is increasing more slowly. For households already spending more on food and transport, the relief would come from prices rising at a slower pace, particularly if their incomes also improve.

Borrowing conditions, meanwhile, have started to improve. The CBK maintained its benchmark interest rate at 8.75% on October 7, but average commercial bank lending rates have fallen from 17.2% in November 2024 to 14.4% in September 2026. Lending to the private sector has also recovered, growing by 10.6% in September compared with 10.3% in August, following a period when credit was contracting.

For businesses that depend on bank loans to finance operations or expansion, lower lending rates can make borrowing more affordable. However, rates averaging 14.4% still represent a substantial financing cost, particularly for smaller businesses.

The economic outlook also faces risks from developments outside Kenya. The conflict in the Middle East has pushed up global energy costs, with Kenya's energy regulator raising petrol and diesel prices in October because of higher import costs. Further increases could raise transport and production expenses, making the IMF's projected decline in inflation harder to achieve.

Severe weather, including the possibility of El Niño-related disruptions, could also affect agricultural production and food prices. These pressures will influence whether Kenya achieves the modest economic improvement projected for 2027.

For now, the figures point to an economy that could grow faster next year, with bank lending already showing signs of recovery. But September's inflation data and the latest fuel price increases illustrate how easily higher costs can persist even as the broader economy expands. A stronger economy does not automatically mean cheaper living for the people and businesses operating within it.