Thursday 27th August, 2026 06:31 AM|
Kenyan businesses remain broadly optimistic about the economy, but a Central Bank of Kenya (CBK) survey shows that political uncertainty ahead of the 2027 General Election is emerging alongside weaker growth expectations and other risks to investment.
The July 2026 CBK Market Perceptions Survey found that private-sector firms still expect Kenya’s economy to remain resilient over the next 12 months, supported by lower interest rates, improving private-sector credit, tourism, construction, consumer demand and macroeconomic stability.
But the optimism comes with important caveats. Businesses are facing high operating costs, weaker consumer spending, elevated fuel and energy prices, fiscal pressures and geopolitical risks. Political uncertainty is also identified as a factor that could affect business expansion, with the survey warning that some investment activity could moderate as the election approaches.
What the CBK survey discloses
The survey covered 400 private-sector institutions and firms, receiving responses from 36 commercial banks, 13 microfinance banks and 200 non-bank private-sector firms.
Respondents expect moderate economic activity between August and October 2026. Sixty-two per cent anticipated moderate activity, with agriculture, tourism, trade and ICT among the sectors expected to support demand. Lower borrowing costs and ongoing public and private investment were also identified as factors supporting economic activity.
However, the expected pace of growth has softened.
Non-bank private-sector firms lowered their 2026 growth expectation to 4.13 per cent in July, from 4.38 per cent in May and 4.91 per cent in March. Banks projected growth of 4.64 per cent, down from 5.14 per cent in January.
Trade had the lowest growth expectation among the listed sectors at 3.74 per cent, followed by transport at 3.76 per cent and real estate at 3.93 per cent.
Election uncertainty enters investment calculations
The survey does not say that businesses are abandoning Kenya because of the 2027 election. Instead, it points to political uncertainty as one of several domestic factors that could influence expansion decisions.
Real estate, building and construction could be particularly exposed as the election approaches because of the sectors’ reliance on government-funded projects.
That makes political predictability an increasingly important issue for companies planning investments beyond the current economic cycle.
The survey also highlights high debt-servicing costs, increased government domestic borrowing and fiscal pressures as risks that could constrain private investment.
Credit growth also shows caution
Kenya’s banks expect private-sector credit to grow by 9.9 per cent in 2026, below the 11.7 per cent expectations recorded in January and March.
Lower lending rates are supporting credit demand, particularly from businesses seeking working capital and expansion financing. But respondents warned that high production costs, fuel prices and uncertainty could delay major borrowing and investment decisions.
The result is a private sector that wants to expand but is also watching costs and economic risks closely.
Businesses see limited hiring growth
The caution extends to employment as the CBK survey found that hiring expectations for 2026 remain broadly unchanged from 2025. Recruitment is expected to focus mainly on business expansion, replacing departing employees and acquiring specialised skills.
At the same time, firms cited cost reduction, efficiency improvements and increased use of digital technologies, artificial intelligence and automation as factors shaping employment decisions.
For Kenyan households, that means continued economic growth may not automatically translate into a major increase in formal employment. Despite the near-term concerns, businesses have not turned pessimistic about Kenya’s longer-term prospects.
Respondents expect economic growth between 2027 and 2031 to average between 5.0 per cent and 5.9 per cent, supported by agriculture, services, manufacturing, tourism, construction, infrastructure and technology.
The survey therefore presents a more nuanced picture of Kenya’s 2027 economic outlook: businesses remain confident in the country’s long-term potential but want greater certainty before committing capital in an increasingly unpredictable environment.
Their recommendations include predictable and simplified regulation, reduced fiscal pressure, timely settlement of government pending bills, greater use of public-private partnerships and restraint on excessive domestic borrowing.
As the 2027 election approaches, the challenge for Kenya will be to preserve the macroeconomic stability that businesses currently cite as a source of confidence while limiting the political and fiscal uncertainty that could make firms postpone investment decisions.
