Manufacturing, tourism boost East Africa’s biggest economy to three-year high

Kenya’s economy accelerated to its fastest first-quarter growth in three years, as a rebound in manufacturing, booming tourism, and resilient construction activity helped East Africa’s biggest economy withstand a challenging global environment.

Data released on Friday by the Kenya National Bureau of Statistics (KNBS) showed the economy expanded by 5.3 percent in the first quarter of 2026, up from 4.9 percent in the same period last year. The stronger performance reinforces Kenya’s position as one of Africa’s fastest-growing major economies despite rising global uncertainty and weaker external demand.

The roughly $150 billion economy has sustained annual growth of around five percent in recent years, with every major sector expanding during the first three months of the year.

Manufacturing emerged as one of the biggest drivers of growth, accelerating to 4.4 percent from 2.8 percent a year earlier as industrial activity strengthened.

Other standout performers included accommodation and food services, which surged 14.7 percent on the back of a strong tourism recovery, while mining and quarrying expanded 9.1 percent. Construction grew 6.6 percent, financial and insurance services 6.3 percent, information and communication 5.0 percent, and agriculture, forestry and fishing 4.9 percent.

The broad-based expansion comes despite a mixed macroeconomic backdrop.

Average inflation rose to 4.35 percent during the quarter from 3.45 percent a year earlier, largely driven by higher food and non-alcoholic beverage prices.

The Kenyan shilling was broadly stable against the US dollar, appreciating marginally by 0.1 percent, and gained 2.9 percent against the Japanese yen. However, it weakened 11.2 percent against the euro and 6.9 percent against the British pound. Regionally, the currency also depreciated against the South African rand, Ugandan shilling and Tanzanian shilling.

The digital economy showed mixed trends. Mobile money transactions declined 13.6 percent, even as mobile voice traffic and international internet bandwidth increased, suggesting consumers are increasingly shifting towards bank-linked digital payments and other electronic payment channels.

Meanwhile, electricity generation rose 7.4 percent, supported by a 21 percent increase in geothermal output, although lower wind and solar generation partly offset the gains.

Despite the encouraging start to the year, the World Bank cautions that Kenya must address deep-rooted structural weaknesses to sustain stronger and more inclusive growth.

In its latest Kenya Growth and Jobs report, the multilateral lender said that although Kenya’s economy has expanded at an average annual rate of 4.5 percent between 2001 and 2025—raising incomes, reducing poverty and improving access to electricity, healthcare and education—the pace has lagged behind countries with similar income levels.

The World Bank said the country’s growth model has become less inclusive in recent years, with the lingering effects of the COVID-19 pandemic, macroeconomic vulnerabilities and structural bottlenecks weighing on long-term prospects.

“To sustain economic growth, reduce poverty and make economic gains more inclusive, Kenya needs to address pressing structural challenges,” the lender said.

It identified four key constraints that require urgent attention: fiscal pressures, external imbalances, weak productivity and growing climate-related risks.