EAC bloc rallies Africa’s 2026 economic projections

By Bonface ORUCHO

East Africa is expected to be Africa’s fastest growing subregion in 2026, with GDP projected to expand by 5.8%, according to the UN World Economic Situation and Prospects 2026. The UN names Ethiopia and Kenya as the main drivers, putting the sub-region well ahead of the continent’s projected 4.0% average.

The UN report says East Africa will record the highest growth, at 5.8% in 2026, a performance tied to stronger investment and expanding power capacity. The report however warns that high debt servicing costs, limited fiscal space and tighter global financing conditions remain downside risks to the recovery.

Outside Addis Ababa, earthworks are under way for what Ethiopia describes as Africa’s largest airport. The US$12.5 billion Bishoftu International Airport is meant to anchor aviation, logistics and exports, and Prime Minister Abiy Ahmed called it “the largest aviation infrastructure project in Africa’s history,” according to Reuters coverage.

Kenya is also moving to modernize its air hub. President William Ruto has said the government will begin work on a modern, world-class airport at Jomo Kenyatta International Airport and start major upgrades in 2026.

After a previous Adani-led deal fell through, Nairobi has said it will engage partners such as Qatar for a KSh200 billion (more than US$1.5 million) upgrade, according to local reporting. The plan also includes SGR extensions and road works to strengthen Nairobi’s role as a logistics and trade gateway.

According to analysts, Ethiopia and Kenya matter beyond their borders. “Their investment cycles shape trade corridors, power supply and capital flows across East Africa and the Horn,” noted Jared Kwisia, a Kisumu-based development finance analyst at the Diamond Trust Bank.

“Whether Africa’s projected rebound in 2026 becomes durable growth or a shallow uptick will depend largely on execution.”

From a data angle, the UN projects Ethiopia to grow by 6.3% in 2026 and Kenya by 5.1%, numbers that anchor East Africa’s strong showing. The UN also notes that East Africa’s forecast remains below its 2010 to 2019 average of 6.3%, a reminder that returning to pre pandemic growth is not guaranteed. Ethiopia’s advantage is scale, ambition and reform momentum.

It has a young workforce and a broad pipeline of projects in hydropower, roads, rail and airports intended to shift the economy toward manufacturing and logistics, according to government briefings. Currency and financial-sector reforms since 2024 have helped unlock support from the IMF and World Bank.

The IMF says the reforms are a critical step toward restoring external balance and investor confidence, while warning that the transition requires careful liquidity management, according to its 2025–2026 country assessment.

Ethiopia’s reform story gained fresh backing on January 16, 2026. The IMF Executive Board completed the fourth review of Ethiopia’s Extended Credit Facility programme, approving an immediate disbursement of about US$261 million and bringing total disbursements under the programme to about US$2.18 billion, according to the IMF.

The Fund said Ethiopia is delivering “better than anticipated macroeconomic outcomes,” citing strong growth, rising exports, improved revenue mobilisation, reserve accumulation and declining inflation as early results of the reform push.

“The authorities continue to make progress in advancing their ECF supported economic reform agenda,” said IMF Deputy Managing Director Nigel Clarke following the Board decision.

“Measures to enhance the foreign exchange market, modernise monetary policy and mobilise fiscal revenues continue to show encouraging results.”

Mered B. Fikireyohannes, founder and CEO of Pragma Investment Advisory, who follows Ethiopia’s reform process closely, says reform is moving in the right direction.

“From a macro and micro indicator perspective, the reform is moving in the right direction. Export numbers are up, imports are flowing better, forex inflows look stronger, and the government has not been printing money. Inflation is coming down.”

“But from the household and firm perspective, people are still struggling,” he adds. “Living costs remain very high, and credit is tight because of the monetary policy stance.”

He calls forex the single biggest risk in 2026, pointing to fractures between official bank rates and parallel market pricing. That split, he says, creates uncertainty for banks and businesses.

Kenya’s advantage is diversification and macro buffers. Its economy spans agriculture, manufacturing, tourism, finance and digital services.

That mix helps cushion shocks and sustain private activity. The central bank reported foreign exchange reserves of about US$12.2 billion in late 2025, equal to roughly 5.3 months of import cover, and described the level as adequate to support stability, according to Central Bank of Kenya statements. Kenya’s airport plan, if delivered, could amplify these strengths.

A modernized JKIA and a new terminal would ease capacity bottlenecks, lower logistics costs and boost tourism and cargo handling. The government’s push to pair JKIA upgrades with SGR extensions and new highways aims to create an integrated corridor linking ports, rails and airports, according to local reporting.

However, Kenya faces fiscal limits. Debt servicing narrows space for public investment. Domestic capital markets can only absorb so much long dated paper, and mobilizing pension funds for infrastructure will require regulatory change and credible projects that meet institutional investors’ risk and return needs. Across the region, the main constraint is long term finance.

The African Development Bank warns of a persistent gap in affordable long dated capital for infrastructure and says pipelines often outpace financing capacity, according to its 2025 infrastructure outlook.

Ethiopia’s PPP programme has advanced several solar and housing projects, but the largest projects still rely on blended finance and sovereign support. If revenue forecasts fall short, contingent liabilities could widen. Kenya is pursuing a blend of domestic bonds, external loans and PPPs. Its 2025/26 budget allocates sizable resources to development but will still need external partners and private capital to hit big-ticket projects. Growth that does not create jobs will be politically fragile.

The World Bank notes that current growth patterns across Africa are not translating into enough wage employment, according to its 2025 Africa’s Pulse report. Ethiopia’s investments could catalyze manufacturing and logistics, but only if firms can access reliable power, skills and foreign exchange. Kenya’s services sector may absorb growth faster, but neither country can assume that new capital will automatically produce broad employment gains.

The regional payoff is clear. Better ports, airports and power reduce costs for landlocked neighbours, expand market access and deepen trade. The UN Economic Commission for Africa says the performance of Ethiopia and Kenya has system wide implications for trade, energy and transport corridors across East Africa, according to UNECA assessments.

According to UNECA, exports from the Democratic Republic of Congo to the United States rose by more than US$1 billion between April and July 2025 compared with the same period in 2024. Ethiopia and Kenya also recorded sharp increases, with exports to the US rising by 95% and 22% respectively.

UNECA attributes the surge partly to trade diversion, noting that tariffs imposed on Ethiopia and Kenya were around 10%, far lower than the 30% applied to major Asian exporters such as China, whose exports to the US fell by 35.6% year on year to July 2025. Regional trade is also deepening.

UNECA says total trade within the East African Community surpassed US$11 billion in 2024, a 22% increase from 2023. Intra-African trade grew by 8.5%, far outpacing the 0.4% growth recorded in exports to markets outside the continent.