Kenya Poised to Overtake Ethiopia as East Africa’s Largest Economy
May 10, 2025 — Nairobi, Kenya
Kenya is on track to become East Africa’s largest economy in 2025, overtaking long-time regional rival Ethiopia, according to a new forecast by the International Monetary Fund (IMF). The IMF attributes this projected shift to a combination of favorable currency dynamics, growing export performance, and a surge in remittances.
According to the IMF’s latest World Economic Outlook, the Kenyan shilling has appreciated by 21% against the U.S. dollar since early 2024 — one of the strongest rebounds among African currencies. The strengthening of the currency has boosted Kenya’s nominal GDP in dollar terms, enhancing its regional economic position.
At the same time, Kenya has experienced robust economic growth, fueled by rising agricultural exports, strong tourism recovery, and increased inflows from the Kenyan diaspora. The IMF projects Kenya’s GDP will reach approximately $118 billion in 2025, surpassing Ethiopia’s forecasted $111 billion.
“This is a significant milestone for Kenya and reflects broad-based resilience in the face of global and regional economic challenges,” said IMF Senior Economist Linda Kiptoo. “The strong performance of exports and remittances has been particularly pivotal.”
In contrast, Ethiopia’s economic expansion has slowed due to political instability, high inflation, and foreign exchange shortages. The country’s protracted recovery from the Tigray conflict and reduced investor confidence have weighed heavily on growth projections, despite its larger population and historical growth momentum.
Kenya’s government welcomed the IMF report, touting it as evidence that economic reforms and fiscal discipline are beginning to yield results. Treasury Cabinet Secretary Njuguna Ndung’u said the outlook “underscores the success of our policies aimed at stabilizing the currency, diversifying the economy, and deepening financial inclusion.”
However, economists caution that maintaining the top spot will require sustained reform efforts. High public debt levels, persistent youth unemployment, and climate vulnerability remain key challenges for Kenya’s economy.
“Crossing this threshold is an achievement, but staying ahead will depend on policy consistency and regional stability,” said economist Dr. Nancy Gitau of the Kenya Institute for Public Policy Research and Analysis (KIPPRA).
If the IMF projections hold, Kenya’s economic ascension will mark a new chapter in East Africa’s development narrative, reinforcing its role as a financial, logistical, and diplomatic hub in the region.
