Kenya’s economy grew by 5.1% in the second quarter of 2026, accelerating from 4.9% in the same period last year, as stronger performance in electricity, information and communication, transport and manufacturing offset slowing agricultural growth and mounting pressure from rising fuel prices.
According to the Kenya National Bureau of Statistics (KNBS), the expansion marked the fastest second-quarter economic growth since 2023, highlighting the resilience of key sectors despite increasing operating costs, higher inflation and weakening business conditions in parts of the private sector.
However, the improvement in overall economic output has contrasted with private-sector indicators that point to continued challenges for businesses, including pressure on new orders, consumer demand and operating expenses.
Stanbic Bank’s Purchasing Managers’ Index (PMI) fell to 46.6 in May, indicating a contraction in private-sector business activity, before recovering to 50.0 in June, suggesting that conditions had stabilised. The contrasting indicators underscore an uneven economic recovery, with stronger activity in selected sectors occurring alongside difficulties faced by businesses and households.
Electricity and water supply recorded the strongest growth among the major sectors highlighted in the report, expanding by 7.7% in the second quarter, compared with 6.5% a year earlier.
Electricity sales increased by 15% to 3.51 billion kilowatt-hours, reflecting stronger demand and increased economic activity. Geothermal power generation rose by 10.1%, while wind power generation increased by 13.5%. Thermal electricity generation, meanwhile, declined by 16.3%, indicating a shift in the composition of power generation.
The information and communication sector also strengthened, growing by 7.2%, up from 5.9% in the corresponding period last year. The expansion was supported by increased internet and voice traffic, while utilised international bandwidth surged by 42%.
Domestic short-message service (SMS) traffic declined by 7.4%, reflecting changing communication habits as consumers increasingly rely on internet-based messaging platforms.
Transport and storage grew by 4.4%, compared with 3.3% a year earlier. Freight volumes transported through Kenya’s Standard Gauge Railway increased by 17.7% to 2.05 million tonnes, while cargo handled at Mombasa Port rose by 5%.
The manufacturing sector also showed signs of improvement, with growth accelerating to 2.2% from 1.3% in the same quarter of 2025. Higher production of cement, sugar and steel-related products contributed to the sector’s performance.
Cement output increased by 10.5% to 2.73 million tonnes, while sugar production nearly doubled to 211,800 tonnes, providing additional support to industrial activity.
Despite the stronger performance in several sectors, agriculture continued to face challenges. Growth in the sector, a major contributor to Kenya’s economy and employment, slowed to 3.5% from 4.0% a year earlier.
The slowdown followed the early cessation of the long rains, which affected agricultural performance. Nevertheless, tea production increased by 11.1%, while milk intake by processors declined by 3.1%, highlighting differences in performance across agricultural activities.
The accommodation and food services sector also experienced slower growth, expanding by 7.4% compared with 12.8% in the same period last year.
The slowdown came despite a 1.4% increase in international visitor arrivals through Kenya’s two main airports, suggesting that stronger tourism arrivals did not translate into the same pace of growth recorded a year earlier.
Rising global energy prices emerged as a significant risk to Kenya’s economic outlook during the quarter. Average crude oil prices increased by 54.9% to $104.45 per barrel, while average diesel prices rose by 32% to 217.80 Kenyan shillings per litre.
The increase in fuel costs added pressure on transport, production and distribution expenses, raising concerns about the potential impact on businesses and household purchasing power. Quarterly inflation rose to 6.23%, compared with 3.89% a year earlier, reflecting growing price pressures as energy costs increased.
Higher fuel prices could also affect the cost of goods and services across the economy, particularly for businesses that depend heavily on road transport, imported inputs and energy-intensive production.
The rise in inflation presents a challenge for policymakers seeking to sustain economic growth while protecting households from increasing living costs.
Monetary conditions provided some support to economic activity during the quarter. The Central Bank of Kenya’s benchmark Central Bank Rate stood at 8.75% in June, down from 9.75% a year earlier.
Average commercial bank lending rates also declined to 14.37% from 15.28% over the same period, potentially easing borrowing costs for businesses and households.
However, the extent to which lower interest rates can support investment and consumer spending may depend on the persistence of inflationary pressures and the ability of businesses to maintain profitability amid rising operating expenses.
The Central Bank of Kenya expects the economy to grow by 5.0% in 2026. The second-quarter performance exceeded that annual growth projection, although the quarterly and annual figures measure different periods and should not be directly compared as equivalent indicators.
