LowIV Macro Policy & Sovereign Debt16 October 2026, Friday
Kenya's economy grows 5.1% in the second quarter despite the oil shock
Data released by the Kenya National Bureau of Statistics (KNBS) on 16 October show the economy grew 5.1% year on year in the second quarter of 2026. That is above the 4.9% of a year earlier but below the first quarter's 5.3%. Over the same period the average crude price rose from $67.44 to $104.45.
Services and infrastructure carried growth. Electricity and water expanded 7.7%, accommodation and food services 7.4%, information and communication 7.2%, finance and insurance 6.1% and construction 6.0%. Transport and storage accelerated to 4.4% from 3.3% a year earlier, and manufacturing picked up to 2.2% from 1.3%. Accommodation, which is tied to tourism, grew markedly more slowly than the 12.8% recorded in the same quarter last year.
Agriculture applied the brake. Agriculture, forestry and fishing slowed from 4.0% to 3.5%, which KNBS put down to the early end of the March–May long rains and downgraded harvest expectations. Construction also slowed, to 6.0% from 7.3% a year earlier.
The energy shock has fed through to prices. KNBS figures cited by The Eastleigh Voice show inflation rising to 6.23% from 3.89% a year earlier. The average retail price of diesel climbed 32% to 217.80 shillings a litre. KNBS identified disruption and uncertainty in global energy markets as the main source of pressure during the quarter.
Talay assessment
Bottom line
Despite oil at $104, Kenya kept growth above 5% on the back of electricity, communications, finance and construction. Momentum has nonetheless faded from the first quarter's 5.3%, and inflation rose from 3.89% to 6.23% in a year. The slowdown in agriculture to 3.5% could keep food prices firm in the quarters ahead. The most likely path is for growth to ease towards 5% in the second half of the year.
Likely effects
- Household purchasing powerNegativeWeeks
A 32% rise in diesel prices is passing into transport and distribution costs; inflation of 6.23% squeezes household incomes and business margins.
- Food supplyNegative1–6 months
With the March–May rains ending early, farming slowed to 3.5% and harvest forecasts were cut, which could create second-round pressure on food prices.
- Services economyPositive1–6 months
Strong growth in electricity (7.7%) and communications (7.2%) remains the main buffer allowing the economy to absorb the oil shock.
Possibilities, ranked
- 1Moderate slowdown55%
Services keep carrying growth, but oil and farm pressures leave third-quarter growth slightly below the second quarter.
Watch: KNBS third-quarter GDP data showing growth in the 4.5–5.1% range
- 2Price pressure deepens30%
Oil stays above $100, food inflation accelerates and growth falls below 4.5%.
Watch: Monthly inflation in Kenya exceeding 7%
- 3Momentum returns15%
Energy prices ease, tourism recovers and growth returns to its first-quarter pace.
Watch: Third-quarter growth rising above 5.3%
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Q2 growth (y/y)▲ 5.1%
- Inflation▼ 6.23%
- Average crude price▼ $104.45