Of job creation, cost of living and inflation: Survey punctures Ruto's narrative on economic resilience

President William Ruto’s road to 2027 was paved with promises of economic growth, jobs for the youth, a robust business environment, among other plans. This, however, is proving to be a mirage given the latest Economic Survey. Internal and external factors have complicated and muddied the political waters.

 Kenya’s economy registered weak growth in 2025 as key sectors slowed down and faced monumental challenges in 2026, adding to the President’s second-term bid headache. 

The economy grew at a slower rate of 4.6 per cent in 2025 compared to 4.7 per cent it registered in 2024.

 The growth rate is off target, with earlier projections by the National Treasury having expected the economy to grow by five per cent.

 According to the Economic Survey 2026 released by the Kenya National Bureau of Statistics (KNBS) yesterday, major sectors, including agriculture, manufacturing, financial services and ICT, grew at slower rates, while accelerations in sectors such as construction, lifted by activity in the affordable housing projects, failed to lift the economy. 

 The 4.6 per cent growth rate leaves the Ruto administration in a precarious position, falling short of the targets required to lift millions out of poverty.

 The administration is already at odds with Kenyans, many of them unable to make ends meet, and their lot is getting worse on account of a turbulent economy.

 Economic performance looks even more bleak in 2026, facing new pressures, including the US-Israel war on Iran that has pushed prices of fuel up, with a rise in the cost of essentials also expected to follow. 

This is in addition to the earlier risks that include high public debt that analysts say is unsustainable, dwindling fortunes for many Kenyans—making it hard to tax them and grow State revenues—as well as climate shocks that have had a devastating impact on the country’s agriculture sector, the lifeline for the country’s economy.

 The risks could make it difficult for Kenya to hit its projected economic growth rate of 5.3 per cent in 2026.

 According to a survey, the economy was weighed down last year by weather-related shocks towards the end of the year that also affected key sectors including agriculture, manufacturing and transport. 

 This saw the country’s gross domestic product (GDP), which is the monetary value of all goods and services that Kenyans produced in 2025 — also seen as the national cake — grow to Sh17.6 trillion in 2025 from Sh16.2 trillion in 2024. 

 Growth in the agriculture sector, which is the biggest contributor to GDP, slowed to 2.8 per cent from 4.8 per cent in 2024, which, according to National Treasury Cabinet Secretary John Mbadi, was on account of a severe drought in the fourth quarter of 2025 and had a knock-on effect on other sectors that rely on output from agriculture.

 These include manufacturing subsectors that carry out agroprocessing, as well as transport. 

 Mbadi explained that while agriculture registered above average growth in the first three quarters of 2025 at more than 4.8 per cent, the failed short rains season hurt the agriculture sector. This also affected other sectors that rely on agriculture. 

 “Over the fourth quarter, we witnessed a very severe drought in this country, which spilt over to January and February this year. It hit us so hard. And because of that, the agricultural sector registered a negative growth.“Which also explains why even the manufacturing sector slowed because the manufacturing sector goes hand in hand largely with the agricultural sector, Kenya being heavily dependent on agriculture,” the CS said during the release of the survey.

 “Transport and storage, as usual and as expected, also slowed down from 4.3 per cent to 3.7 per cent. Again, transport, if the production goes down, obviously, there will be little to transport and even to store.”

 Agriculture remained the largest contributor to the economy, accounting for 23.2 per cent of GDP. Despite the dismal performance during the year, agriculture’s contribution to GDP rose when compared to 22.4 per cent in 2024.

 The data showed that other economic sectors fared badly in 2024 and ceded some of the ground they had gained in terms of contribution to the economy to agriculture.

 The contribution of the manufacturing sector to GDP dropped to 7.1 per cent from 7.3 per cent, and transport and storage to 11.8 per cent from 12.7 per cent.

 Macdonald Obudho, director general of KNBS, noted that manufacturing had the potential to contribute more to the economy, noting that despite the decline in its contribution to GDP, it remained one of the largest employers in the country.

 “This is a sector that could be a game-changer. It could increase employment and reduce of payments if increase the export of locally made goods,” he said.

 The economy created 822,100 new jobs, which is higher than 782,300 created in 2024 but still short of the one million new jobs per year that the president had promised. 

While the accommodation and food services sector was a top performer last, growing 15.6 per cent, driven by a continued recovery in tourism, it was still a slower growth rate compared to the 25.9 per cent growth recorded in 2024.

 Other sectors that registered slowed growth included telecommunications and financial services, and the insurance sector. 

 “Those are the key sectors which contributed to the slowed growth of the economy.”

 Inflation, which shows the rate at which the price of goods increases, stood at 4.1 per cent, which is the lowest in recent years, but the declining trend could be reversed as the country faces major fuel price shocks this year.

 The higher fuel prices this month, Mbadi said, had pushed inflation to 5.6 per cent in April from 4.4 per cent in March. KNBS is set to publish detailed data on inflation for April.

 There are expectations that prices could further rise as the US-Israeli war on Iran continues to escalate with no end in sight.

 “The country’s inflation continued to ease to 4.1 per cent in 2025 to remain within the government’s target range of between 2.5 per cent and 7.5 per cent,” said Mbadi, while also explaining that the cost of living is already on the rise following the sharp increase in pump prices in mid-April.

 “However, the latest is that in April, inflation has jumped to 5.6 per cent from 4.4 per cent in the month of March… with the possibility that it can go a little higher in May. The contributing factor to this jump in inflation is the geopolitical disruptions that have happened in the Middle East. This has increased the cost of petroleum products, which has shaken the economy in its entirety.”

 High fuel prices have already seen the cost of transport and production of agricultural and some manufactured goods go up.

 While some of the costs have been immediate for consumers, there are more shocks expected that are likely to push the cost of essentials beyond the reach of many Kenyans.

 Mbadi noted that these are among the major risks to Kenya’s economy, with others including elevated debt levels that, while the government insists are still sustainable, analysts note the country is already in debt distress. 

 “We also have high debt servicing obligations, which is limiting our fiscal space for development spending. We are now spending 48 per cent of the money we collect from you (Kenyans), to service our debt,” he said.

 The construction sector last year emerged as a key driver of economic growth, rebounding from a 0.7 per cent contraction in 2024 to register a growth of 6.8 per cent in 2025. 

 Mbadi said the recovery was largely due to the resumption of major public infrastructure projects as well as increased real estate activity.

 Housing projects by the government, businesses and individual Kenyans resulted in consumption of cement growing by 20 per cent after a significant drop in 2024.

 “The construction sector grew from a negative of 0.7 per cent to 6.8 per cent. And this is attributed to two factors – the affordable housing projects and resumption of road projects after they were paid their pending bills,” said Mbadi.

 “Although affordable housing) had a lot of political noise around it, you can see that it has contributed significantly to our economic growth… it is also contributing to employment.

 “Secondly, we took a bold step in terms of financing and supporting our road construction sector, which had completely stalled. And out of the securitisation of road maintenance levy, we managed to raise funds to unlock the problem that was in the road sector.”

 “You can now see contractors are back and road constructions have resumed and are progressing well all over the country.”