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Kenya’s economic outlook for 2026 is cautiously optimistic, supported by a strong rebound in capital markets, easing inflation and improving macroeconomic stability, even as fiscal pressures and global uncertainty persist.

The outlook emerged from the 2026 Economic Outlook Breakfast hosted by the Kenya Private Sector Alliance (KEPSA) in partnership with the Nairobi Securities Exchange (NSE) and KPMG.

Speaking during the forum, NSE Chief Executive Officer Frank Mwiti said 2025 marked a decisive turning point for Kenya’s capital markets, positioning the Exchange as the second best-performing equity market in Africa.

“The year 2025 reaffirmed Kenya’s positive economic trajectory, one defined by resilience, disciplined stewardship and renewed confidence in the promise of our economy,” Mwiti said.

He said the performance was anchored on improving macroeconomic fundamentals, including declining interest rates, relative currency stability, improving growth prospects and enhanced coordination between fiscal and monetary policy, which created a more predictable operating environment for businesses and investors.

According to Mwiti, total market capitalisation expanded by 47.97 percent to approximately Sh3.0 trillion from Sh1.968 trillion in 2024.

Equity turnover rose by 37.28 percent to Sh145 billion, reflecting improved liquidity and renewed investor participation.

The fixed income market recorded a strong year, with bond turnover reaching a record Sh2.7 trillion, a 75.5 percent increase from the previous year.

Mwiti said the performance reflected sustained demand for government securities, improved yield dynamics and a growing appetite for corporate bonds as firms diversified funding sources.

Equity indices mirrored the rally, with the NSE 20 Share Index gaining 56.13 percent to close at 3,139.19 points, while the NSE All Share Index rose by 51.10 percent to 186.58 points.

KPMG Partner and Head of Private Enterprise in Africa Sandeep Main said Kenya is entering 2026 with improving growth momentum but remains constrained by structural and fiscal pressures.

“Growth prospects are supported by easing inflation, a stabilising currency and recovery in key sectors such as agriculture, construction and ICT,” Sandeep said.

“However, high public debt, rising tax compliance demands and expensive credit continue to weigh heavily on businesses.”

Sandeep said Kenya’s GDP growth is projected at between 4.9 and 5.2 percent in 2026, noting that policy consistency and targeted reforms will be critical to sustaining private sector investment and job creation.

KEPSA Vice Chair Brenda Mbathi said the private sector remains central to Kenya’s growth agenda amid shifting global trade dynamics and rapid technological change.

“Kenya continues to demonstrate resilience, innovation and entrepreneurial strength,” Mbathi said, adding that KEPSA will continue engaging policymakers to improve the business environment, promote investment and deepen regional and continental trade integration.