Hope and fear to dominate economic prospects of 2026

Let’s address the prospects of this year using the funnel approach, from broad to narrow issues. Men are more conversant with a funnel, usually an old plastic bottle with the bottom ripped off. Why are men more likely to run out of fuel than women?

Our tears or smiles in 2026 will depend on what happens beyond and within our borders. We are part of a global economic system, geo-economics. Events faraway affect us, even if we live in the villages (shags)

Let’s start from the east, China. Its gross domestic product (GDP) growth will fall from around five per cent in 2025 to 4.4 per cent in 2026. The effect of such a slowdown will depend on how coupled we are to China through trade, investment, debt and foreign aid.

And we are. We trade with China, and she has a trade surplus with us.

China has significant projects in Kenya, some debt or grant-funded. An economic slowdown in China would mean less demand for our goods, less money to invest here or lend to us.

That would be felt by our GDP. The only bright spot, a slowdown in the Chinese economy will lead to less demand for oil and a fall in prices, lower inflation. India is poised to become the world’s fourth-largest economy. World Bank projects a growth of 6.5 per cent in 2026. Yet we hear more of China than India, much closer to us.

May be familiarity breeds contempt; we have had Indians here for more than a century. Yet the gravity theory of trade suggests we should trade more with our neighbours. Why is India an exception? Is India in CBE (Competence-Based Education? Why do we teach Mandarin (Chinese) and not Hindi? Should we not rise with India?

A deal on the Ukrainian war would lead to economic smiles. That would lower oil prices and increase trade because of the lifting of sanctions against Russia. Peace in Ukraine would release lots of resources now going to the defence industry in Europe. That would mean more investment in Kenya, more grants and more trade. Remember, the European Union is a big funder for projects in Kenya and a major trading partner. For the UK, it seems a decoupling has been ongoing, and its economic influence is on the wane. Remember Land Rover? Now Diageo is selling off. And a keen observer will note that the former “British” homes in Nairobi’s affluent suburbs are getting new owners.

The British Isles may mute our smiles.

The events across the Atlantic, in the United States (US), will affect our economic smiles. Will tariffs be lowered and catalyse trade? Will interest rates keep falling and strengthen our shilling, and lead to a fall in inflation?

Will the tough stance on immigration reduce remittances, which act as our private insurance and welfare?

Less talked about is the shift from foreign aid to trade as part of the US new foreign policy. Good in the long run, but it will bite countries addicted to aid.

How soon shall we change our mindset to the new reality? How soon shall we integrate Kenya, particularly rural areas, into global supply chains and trade?

Other regions or countries could contribute to our economic tears and smiles. Noted predominance of the UAE (United Arab Emirates) or Dubai in investment and trade? What of regions like South America and Australia?

Nearer home? Our economic and political fortunes are tied to our neighbours, particularly members of the East African Community (EAC), which I feel is now too big. They are our key trading partners. Will our EAC experience make it easier for us to leverage on Africa free trade area?

Finally, our 2026 prospects will be determined by us. That came out clearly when the first agenda item in a recent funeral in Laikipia was having prospective 2027 candidates introduce themselves. Despite public pronouncements on the economy, the clock will shift to the 2027 polls. Shall we shift our attention from productive sectors of the economy to politics? That’s my fear.

Will contestants start building a poll’s “war chest”? The likely source of such money is often corruption. Some suggest the chest has been filling up since 2022, the last poll. Why is corruption mentioned less nowadays?

It’s likely that in the run-up to 2027, lots of positive economic activities will take place. After all, the 2022 polls were about economics, 2027 polls too. The voters must be appeased. Did you hear hustlers mentioned in the president’s New Year’s speech?

The governments will work overtime to convince the voters that things can only get better, we have turned the corner. That will be repeated in every forum, cross-pollinated with the Singapore narrative.

But the ultimate economic prospects of 2026 will be determined by reality. Do you have a job? Has your purchasing power improved? Can you pay rent? School fees, power and water bills? Can you feed your family? Can you take care of medical emergencies?

The prospects will be determined by ourselves, governments, external factors like war in Ukraine and even our religious beliefs. We hope the weather and leaders will be fair. My verdict is that the economic prospects of 2026 will not be very different from 2025; only messaging will change. GDP growth in 2026 is likely to be close to that of 2025, about 5 per cent. Let’s compare notes in January 2027.