Faith Nyasuguta
Kenya is poised to overtake Ethiopia as East Africa’s largest economy in 2025, according to the latest projections by the International Monetary Fund (IMF). The IMF forecasts Kenya’s gross domestic product (GDP) to reach $132 billion, surpassing Ethiopia’s projected $117 billion.
This anticipated shift follows Ethiopia’s significant economic reforms, including a 30% devaluation of the birr in July 2024. The currency adjustment was part of a broader strategy to secure financial assistance and initiate debt restructuring. Consequently, Ethiopia obtained a $3.4 billion loan from the IMF and additional support from the World Bank.
While these measures provided Ethiopia with much-needed financial relief, they also led to increased import costs and inflationary pressures, affecting the nation’s economic stability. The IMF projects Ethiopia’s real GDP growth at 6.6% for 2025, but the country faces challenges such as high inflation, estimated at 21.5%, and ongoing security concerns.
In contrast, Kenya has maintained relative macroeconomic stability. The Kenyan shilling appreciated by approximately 21% in 2024, bolstering investor confidence. However, the country faced challenges, including public protests in 2023 over tax hikes and deficit-reduction strategies, which impacted investor sentiment and led to significant losses on the Nairobi Securities Exchange.
Despite these hurdles, Kenya’s diversified economy and robust financial sector have positioned it favorably in the region. The IMF projects Kenya’s real GDP growth at 4.8% for 2025.
Both nations continue to navigate global economic uncertainties, including trade tensions and fluctuating commodity prices. The IMF has adjusted its global growth forecast for 2025 from 3.3% to 2.8%, citing potential impacts from higher U.S. tariffs and reduced demand among trading partners.
As Kenya and Ethiopia implement economic reforms and seek financial stability, their trajectories will significantly influence East Africa’s economic landscape. Kenya’s projected ascent underscores its resilience and strategic economic planning amid regional and global challenges.
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