Conflict in the Middle East has disrupted global supply chains and led to a sharp increase in energy prices and transportation costs The Central Bank has cut Kenya’s economic growth projection for 2026 by 40 basis points, on account of rising global fuel prices due to the ongoing war in the Middle East.
Addressing journalists at a post Monetary Policy Committee (MPC) briefing on Wednesday, Central Bank of Kenya boss, Kamau Thugge, said the economy is expected to expand by 4.9 per cent compared to an earlier projection of 5.3 per cent. “This outlook is subject to risks, particularly a prolonged conflict in the Middle East, and elevated trade policy uncertainties,’’ Thugge said.
According to him, the conflict in the Middle East has disrupted global supply chains and led to a sharp increase in energy prices and transportation costs, resulting in higher inflation and moderated global growth prospects. “This is a global phenomenon. World’s growth is projected at 3.1 per cent in 2026, down from 3.4 per cent in 2025, due to the effects of higher inflation and reduced demand arising from higher energy prices and elevated uncertainties.” He added that elevated trade policy uncertainty and the Russia-Ukraine conflict remain key risks to growth.
The growth of the Kenyan economy moderated to 4.6 per cent in 2025 from 4.7 per cent in 2024, due to a slowdown in the growth of the agriculture and services sectors. However, growth in the industrial sector recovered strongly, supported by construction. Leading indicators of economic activity point to resilient performance in the first quarter of 2026.
The Central Bank has also asked Kenyans to tighten their belts as it expects inflation to keep rising due to oil price shocks. He said that this is a global trend, with inflation expected to increase to 4.4 per cent in 2026 from 4.1 per cent in 2025 on account of higher energy prices and transport costs attributed to supply chain disruptions from the Middle East crisis.
He noted that inflation rates in most major economies have increased and remained above their respective targets in recent months, due to elevated energy prices and stickiness in core inflation.