SUB-SAHARAN Africa economies, Kenya included, remain resilient despite geopolitical tensions, climate shocks, declining development assistance, and fiscal pressures, says the World Bank.
However, the latest World Bank Africa Economic Update warns that escalating conflict in the Middle East could push up global fuel prices, increasing Kenya’s import bill and raising transport and production costs for households and businesses.
The bank’s biannual economic report for the region projects growth in the region to rise from 4.1 per cent in 2025 to 4.3 per cent in 2026, 0.3 percentage points above the April 2026 forecast.
Kenya’s economic growth is expected to remain resilient but faces a more uncertain global environment, with the World Bank warning that geopolitical tensions, high financing costs and weak job creation could undermine gains in the region, including the East Africa’s strongest economy.
World Bank has put 2026 growth at 4.3 per cent, below the National Treasury’s target of between five and 5.3 per cent, highlighting the pressure facing the country as it seeks to sustain economic expansion while containing debt and fiscal risks.
The regional outlook comes against a backdrop of geopolitical tensions, trade policy uncertainty, tighter financial conditions, climate shocks and declining development assistance.
World Bank says improved macroeconomic resilience, stronger domestic demand and investment associated with the global energy transition and digital technologies are supporting activity across the region.
For Kenya, agriculture is expected to provide an important buffer, supported by improved harvests, while easing interest rates and a recovery in private-sector credit could strengthen consumption and investment.
Kenya’s relatively stable foreign exchange market also provides some protection against imported inflation, although the economy remains exposed to movements in international oil and commodity prices.
The latest World Bank Africa Economic Update warns that escalating conflict in the Middle East could push up global fuel prices, increasing Kenya’s import bill and raising transport and production costs for households and businesses.
Higher food, fertiliser and energy prices could also reverse some of the recent progress made in containing inflation.
The county’s inflation has risen for three consecutive months, according to the Kenya National Bureau of Statistics.
Annual inflation climbed to 6.8 per cent in September, up from 6.6 per cent in August and 6.5 per cent in July. The rate was at 6.4 per cent in June.
“The price increase was primarily driven by a rise in prices of items in the food and non-alcoholic beverages (9.5 per cent), transport (15.6 per cent), and housing, water, electricity, gas and other fuels (3.2 per cent) over the one-year period,” “KNBS director general, Macdonald Obudho, said.
The World Bank estimates that higher commodity and transport costs could push between one million and 2.4 million additional Kenyans below the poverty line, increasing pressure on household incomes.
Businesses also face higher input costs which could squeeze margins, while weaker purchasing power could constrain demand, particularly among low- and middle-income households.
Kenya also faces domestic pressures, including the need to consolidate public finances while maintaining spending on infrastructure and social services.
High debt-service costs are limiting fiscal space across the region, with the World Bank putting public debt at about 57 per cent of GDP for Sub-Saharan Africa.
The bank said governments must increasingly mobilise domestic revenues, deepen local capital markets and seek more sustainable sources of development financing as external assistance declines.
The challenges are particularly important for Kenya, where the government is pursuing fiscal consolidation while seeking to maintain investment and economic activity.
The World Bank said the region’s growth remains insufficient to substantially reduce extreme poverty or create enough jobs for its rapidly expanding labour force.
“Despite a challenging global environment, economic activity in Sub-Saharan Africa continues to demonstrate remarkable resilience, with growth forecasts upgraded for nearly three-quarters of countries in the region,” said Andrew Dabalen, World Bank chief economist for the Africa Region.
He said the next challenge is converting economic growth into more jobs and better opportunities.
The World Bank has identified artificial intelligence and digital technologies as one avenue through which African economies could improve productivity and accelerate structural transformation.
Kenya is among a small group of African economies where AI activity and adoption are already emerging, alongside Nigeria and South Africa.
Rather than attempting to compete immediately in developing frontier AI systems, the World Bank sees an opportunity for African countries to develop affordable, locally adapted AI applications.
In Kenya, this could include low-bandwidth applications for agriculture, education, healthcare, finance, logistics and public administration.
But the bank cautions that the opportunity will depend on investment in reliable electricity, affordable internet connectivity, digital skills, quality data and computing infrastructure.
Kenya’s established digital economy, financial technology ecosystem and expanding technology sector could provide a foundation for wider adoption of AI-powered services.
The challenge, World Bank notes, will be ensuring that the technology translates into productivity gains and employment rather than remaining concentrated among a relatively small group of highly skilled workers and technology companies.
The World Bank also warned that risks to the regional outlook remain tilted to the downside.
Climate shocks, including a possible El Niño event, could disrupt agricultural production and increase food insecurity, while tighter global financial conditions could further constrain governments’ ability to finance development.
