Kenya’s economy grows 5.1pc despite Iran war price shocks
Kenya’s GDP expanded by 5.1 per cent in Q2 2026, accelerating from 4.9 per cent in the same quarter of 2025 despite the double shock of global war and early cessation of long rains.
The economy shrugged off the Iran war and below-average rainfall to grow 5.1 per cent in the second quarter to June, the Kenya National Bureau of Statistics (KNBS) said.
The growth was faster than the 4.9 per cent growth in the same quarter last year despite the pain of high oil prices resulting from the Iran war and reduced rainfall that slowed farming—Kenya’s largest sector and employer.
Strong activity in sectors including transportation and storage, accommodation, and food services supported it.
Analysts expected the commodity shortages, energy price hikes and supply chain disruptions following the US and Israel-launched strikes on the Islamic Republic from February 28 to scar the global economy.
“The second quarter of 2026 was characterized by disruptions and uncertainty in the global energy market and the early cessation of the long rains,” KNBS wrote in the report.
Growth in GDP— a measure of all economic activities by the government, companies and individuals — should ideally translate to increased earnings and more jobs.
The transportation and storage sector grew by 4.4 per cent compared with 3.3 per cent in the second quarter of 2025.
“The sector's performance was supported by increased activity across land, rail, and water transport,” the report states.
Other sectors that recorded notable growth included electricity, information and communication technologies, financial services and construction.
The improvement in the economy in the second quarter came against a backdrop of rising living costs, with inflation climbing to 6.23 per cent from 3.89 per cent a year earlier, largely driven by higher prices of food and transport.
The KNBS numbers show that the economy, however, maintained its growth momentum despite the energy-price shock and weather-related challenges.
The average retail price of light diesel rose by 32 per cent to Sh217.8 per litre from Sh165.1 in the corresponding quarter of 2025, reflecting the impact of higher global energy prices because of unresolved conflicts in the Middle East.
This was after average crude oil prices, which drive the cost of refined petroleum imports into Kenya, increased to $104.45 (Sh13,558) per barrel from $67.44 (Sh8,754).
Higher fuel prices feed into transport and distribution expenses, while weaker agricultural growth puts pressure on food supplies, squeezing household purchasing power and raising operating expenses for businesses.
The construction sector, which is witnessing increased activity in road projects and State-backed affordable housing, expanded at a slower pace, at 6 per cent, compared with 7.3 per cent in a similar quarter of 2025.
This is despite cement consumption growing 11.1 per cent to 2.69 million tonnes from 2.42 million tonnes, while galvanised sheets and steel bars and rods increased by 19.7 per cent and 5.0 per cent, to 92,424.0 tonnes and 138,365 tonnes, respectively.
The KNBS report shows services fared better, with information and communication expanding 7.2 per cent, financial and insurance activities by 6.1 per cent, while electricity and water supply grew by 7.7 per cent.
Accommodation and food services grew by 7.4 per cent, although this was slower than the 12.8 per cent recorded in the same period last year.
The performance of these sectors helped lift overall economic growth despite weaker conditions in parts of agriculture, which remains a key source of income, jobs and food supplies.
Growth in agriculture, forestry and fishing sector slowed to 3.5 per cent in the second quarter from 4.0 per cent a year earlier, partly because of unfavourable weather conditions that affected crop production.
“The early cessation of the March–May long rains in May 2026, particularly during the critical stages of crop development, resulted in the downward revisions of expected crop production,” the KNBS researchers wrote in the report.
Growth in the sector, which accounts for more than a fifth of the GDP, was supported by higher production of some crops. Tea posted an 11.1 per cent jump in output to 162,600 tonnes from 146,300 tonnes, while coffee exports rose by 10 per cent to 22,046.4 tonnes.
The mixed performance in agriculture raises concerns about the supply of food and the cost of living, because food cost pressures are among the main drivers of inflation, accounting for about a third of the consumer basket.
The data shows activities in manufacturing also improved, growing at a faster rate of 2.2 per cent from 1.3 percent in the second quarter of 2025. The relatively modest expansion suggests an improvement in industrial activity.
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