Kenyans may be headed for a brighter year ahead following a difficult 2025, as macroeconomic indicators signal robust growth and stronger job creation on a projected 5.5 per cent economic growth.
This, as the private sector foresee a more stable operating environment which could open up hiring by firms, with key investments by the government, mainly in infrastructure, also expected to create more jobs.
The projected economic growth will be higher than last year’s expected real GDP growth of between 4.9 per cent and 5.2.
Last year, hundreds of thousands of Kenyans faced job losses, salary delays and cuts as companies were forced to either scale down operations or shut down with layoffs as the last option after exhausting other options like cost-cutting, hiring freezes or voluntary programmes.
For those who remained in employment, many face stagnated salaries with some having to take pay cuts according to industry trends.
Various reports indicated a significant number of companies were closing due to a tough economic climate characterised by rising taxes and declining consumer purchasing power.
Job losses during the year cut across sectors such as agriculture, banking, manufacturing, technology, healthcare and media industries due to factors like declining sales, high costs, technological disruption and government policies.
According to the Federation of Kenya Employers (FKE), about 65 per cent of employers felt the business environment had worsened, mainly due to high taxes (66.1%), loss of business (17%), and unfavorable policies (12.2%).
Employers emphasised that reducing the tax burden and creating stable, predictable policies were critical to protecting jobs.
“Our take is that the employment environment is under significant pressure but with urgent interventions, particularly tax reforms, clearing pending bills and strengthening social dialogue, we can stabiliSe businesses and protect jobs. The priority must be supporting enterprises today to safeguard employment tomorrow,” FKE Executive Director and CEO, Jacqueline Mugo, told the Star.
While more than 100,000 jobs are estimated to have been lost last year, with about 66,000 put on the line after the expiry of the African Growth and Opportunity Act (AGOA) in September, the government indicates more than two million jobs were created in 2025.
Government Spokesperson Isaac Mwaura, during a state of economy briefing in Nairobi last month, said the country has moved from recovery to sustained economic growth, supported by stabilised macroeconomic conditions, targeted reforms and people-centred investments.
He noted the government has prioritised expanding opportunities for citizens in agriculture, small businesses, industry, tourism and employment abroad.
“Kenya is deliberately transitioning from a third world economy defined by exclusion to a first world economy anchored in economic freedom, productivity and shared opportunity,’ Mwaura said.
He noted that the Bottom-Up Economic Transformation Agenda (BETA) is the vehicle for this shift, expanding access to capital, markets, skills and modern systems for millions previously locked out of formal economic life.
With 2026 unfolding, both private sector and the government remain optimistic with the World Bank also noting that Kenya could create at least 400,000 jobs per year at the average wage bill.
Procompetitive reforms in key enabling sectors can boost Kenya’s Gross Domestic Product growth by 1.35 percentage points annually and unlock much-needed output expansion, it notes.
High-impact priorities include establishing competitive neutrality between state-owned and private enterprises, lowering barriers to trade and investment, and removing regulatory restrictions to competition in critical input sectors such as electricity, telecommunications and fertiliser.
“As the country grapples with how to fashion a policy mix that will unlock job creation in the formal sector, addressing bottlenecks that undermine the creation of a vibrant, competitive private sector landscape should be front and centre,” the World Bank says in its latest report dubbed “From Barriers to Bridges: Procompetitive Reforms for Productivity and Jobs in Kenya.”
The latest Central Bank of Kenya CEOs Survey and Market Perceptions Survey conducted in November 2025 revealed sustained optimism about business activity and economic growth prospects for the next 12 months.
The optimism was attributed to resilient agricultural production supported by favourable weather conditions, the stable macroeconomic environment with low inflation and stable exchange rate, declining interest rates, and improved private sector credit growth.
Some respondents, however, expressed concerns about subdued consumer demand, the high cost of doing business and increased global uncertainties attributed to higher tariffs and geopolitical tensions.
While respondents reported mixed expectations about hiring prospects in 2026, 74 per cent of banks and 42 per cent of non-bank private firms are anticipating staff increases, with agriculture, manufacturing, trade, construction and tourism sectors expecting new hires in 2026.
The anticipated recovery in employment in 2026 will be driven by planned business growth, diversification and expansion.
Respondents also expect economic growth to be supported by a resilient services sector, including tourism, finance, ICT, trade, transport and retail, all which will support employment.
“These sectors are expected to benefit from cheaper credit, leading to improved economic activity, employment and a recovery in overall demand in the economy,” CBK governor Kamau Thugge said.
Private sector lobby—Kenya Private Sector Alliance (Kepsa) on Friday expressed optmism.
“Businesses are optimistic this year and we are looking foward to continue to work closely with the government and other stakeholders to address regulatory and policy issues that come up. The world is going through a transition to a new trade order and world order. Kenya has an opportunity to position its self as a recipient of investors as the shift happens,” Kepsa CEO, Carole Kariuki, told the Star.
The manufacturing sector, which employs approximately 362,200 and contributes about 18 per cent of total tax revenues to the country, also remains positive.
Kenya Association of Manufacturers (KAM) has however, called for an enabling business environment.
“We hope to have a stable and predictable tax and regulatory environment; an efficient transport and logistics system; and reduce the cost of power,” CEO Tobias Alando said.
The latest Purchasing Managers’ Index by Stanbic Bank Kenya notes that Kenya’s private sector economy recorded another solid upturn in December, as business activity was boosted by a robust increase in customer demand and mild cost pressures.
Strong growth momentum led companies to expand their employment levels at the fastest rate since November 2019, a six-year high, with 2026 looking positive.
“Firms in most sectors highlighted increased employment, especially the construction sector, reflecting efforts by the authorities to stimulate activity. Furthermore, firms reportedly increased their input purchases as well as inventories to facilitate faster deliveries and maintain competitiveness in response to improving conditions,” Christopher Legilisho, Economist at Standard Bank, said.
The Stanbic PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies.
Meanwhile, continued construction of affordable houses by the government is expected to sustain employment and support businesses, including the supply chain and related services, with over 330,000 direct and indirect jobs created so far since 2022.
This is in addition to key infrastructure projects, mainly roads, ports, rail and dams. Among them is the Rironi–Mau Summit and Rironi–Maai Mahiu–Naivasha highways, SGR extension from Naivasha to Kisumu, onward to Malaba.
The government also plans to tarmac 28,000km and construct 1,900km of new roads, upgrade JKIA and the ports of Mombasa and Lamu to deliver the Talanta Sports City by mid-2026. Additionally, It Aims to upgrade Moi, Nyayo, and Kipchoge Keino stadiums to Afcon standards, as well as build at least 50 mega dams, 200 mini-dams, and 1,000 micro-dams.
The Sh5 trillion infrastructure fund is expected to drive development in the country amid President William Ruto’s “Singapore” dream of transforming Kenya into a first-world country.
Industrialisation, expected to leapfrog economic development and create jobs, will be driven by a planned 10,000MW energy boost, with Treasury CS John Mbadi-led Treasury saying the projects would make Kenya an industrial and regional logistics hub.
by MARTIN MWITA
