Economics & Development

GDP growth moderated to 5.9 percent in 2025, reflecting fiscal consolidation efforts and softening global demand. Growth is projected to narrow further to 5.0 percent in 2026, including spillovers from the Middle East, before recovering to 6.0 percent in 2027–28, supported by ongoing reforms. Extreme poverty is projected to decline to 22.2 percent by 2028. Escalating geopolitical tensions, regional security challenges, and climate shocks constitute key risks.

The economic recovery has been strong, with key sectors resilient to Cyclone Ditwah. However, households remain vulnerable, with real wages and employment below pre-crisis levels. Medium-term growth and poverty reduction hinge on continued macro stability amid external shocks such as the conflict in the Middle East, implementation of growth-enhancing structural reforms, and the pace and scale of government post-cyclone reconstruction efforts.

Real GDP grew by 4.0 percent in 2025, driven by agriculture, services, and public spending. Inflation nearly doubled amid fiscal monetization, supply constraints, and fuel shortages. The parallel exchange rate premium narrowed by about one-third, thanks to increased mining export proceeds and favorable seasonal import dynamics. The poverty rate remains high at 74 percent due to inflation and limited job creation.

GDP growth moderated to 3 percent in 2025, driven mainly by textiles and services, while the political crisis in late 2025 weighed on economic activity. Growth is projected to average 4.2 percent over 2026–28, supported by public and private investments. Extreme poverty is expected to remain high at around 65 percent. The outlook is subject to downside risks, including institutional fragility, slow reform implementation, and vulnerability to external shocks.

Economic activity was moderate in 2025, but a rebound in construction, following partial arrears clearance, strengthened momentum; real GDP growth is estimated at 4.9 percent, up from 4.7 percent in 2024. A wide fiscal deficit and elevated public debt remain Kenya’s main macroeconomic challenges, requiring decisive action. Medium-term priorities to create jobs and reduce poverty require stronger fiscal management, improved governance, and enhanced competitiveness.

Eswatini’s GDP growth is expected to edge lower to 3.9 percent in 2026 amid rebounding consumption, slowing investment and unfavorable global impacts. Despite recent robust growth, fiscal pressures and high unemployment persist, with more than half the population living in poverty below the lower-middle-income threshold. Fiscal consolidation is needed over the medium term to ensure sustainability of public finances

The economic recovery has been strong, with key sectors resilient to Cyclone Ditwah. However, households remain vulnerable, with real wages and employment below pre-crisis levels. Medium-term growth and poverty reduction hinge on continued macro stability amid external shocks such as the conflict in the Middle East, implementation of growth-enhancing structural reforms, and the pace and scale of government post-cyclone reconstruction efforts.

Growth is easing as weaker remittances and returning migrants weigh on household incomes and consumption, while the oil price shock is raising inflation. Investment is firmer—supported by manufacturing foreign direct investment (FDI) and improved trade access to the U.S. market—boosting jobs and helping absorb returnees. A prolonged property downturn is increasing non-performing loans (NPL), heightening macro-financial risks.

Economic activity accelerated and reforms advanced in the second half of 2025. However, Lebanon has been significantly affected by the escalation of the conflict in the Middle East since February 2026, which is expected to weigh heavily on economic activity. Risks are tilted sharply to the downside, and the 2026 outlook remains highly uncertain, contingent on the scale, intensity, and duration of the conflict.

Viet Nam’s export-led model has delivered rapid income convergence, though productivity gains have lagged, leaving growth reliant on factor accumulation. Growth is projected to moderate in 2026 as the Middle East conflict affects trade and investor sentiment, while higher oil prices lift inflation. Ongoing institutional consolidation and efficient public investment execution can strengthen resilience, while higher inflation may slow welfare gains, despite low poverty levels.

Oil production ended in 2025, shifting Timor-Leste into a post-oil phase in which large fiscal deficits are financed primarily by Petroleum Fund drawdowns, accelerating depletion risks. Growth reached 4.5 percent in 2025 on high public spending and a rebound in tourism and is projected to average about 4 percent in 2026–28. ASEAN and WTO membership provide reform anchors, but the payoff hinges on reform implementation and a credible path towards fiscal sustainability.

Growth decelerated to 4.4 percent in 2025. Public investment contracted amid governance concerns. Weather shocks and weakened job creation weighed on private consumption. The fiscal deficit narrowed slightly. The Middle East crisis is projected to push growth down to 3.7 percent in 2026, resulting in slower poverty reduction. Growth rebounds to 5.6 percent by 2028 as conditions normalize. Risks are firmly tilted to the downside.