IMF projects Kenya to dethrone Ethiopia as East Africa’s largest economy in 2025

Kenya is set to become East Africa’s largest economy by 2025, overtaking Ethiopia, according to new projections from the International Monetary Fund (IMF).

The IMF forecasts Kenya’s GDP will reach $132 billion, surpassing Ethiopia’s projected $117 billion. This shift is driven by divergent economic strategies. Ethiopia’s decision to devalue its currency, the birr, by over 55% in 2024 unlocked $3.4 billion in IMF support and $16.6 billion from the World Bank. While aiding debt restructuring talks and easing financial pressure, the devaluation increased inflation and import costs, straining an economy already challenged by conflict and climate disruptions. In contrast, Kenya has demonstrated relative macroeconomic resilience. The Kenyan shilling surged by 21% in 2024 — becoming the world’s best-performing currency — boosted by a successful $1.5 billion Eurobond sale, strong diaspora remittances (a record $4.94 billion), and growing export revenues from agriculture and manufacturing.

However, Kenya’s economic rise is not without hurdles. The controversial Finance Bill 2024 sparked protests, investor losses, and forced the government to abandon a four-year $3.6 billion IMF program. Yet, its diversified economy and steady currency performance have helped stabilize growth, despite the projected slowdown in global growth from 3.3% to 2.8%, according to the IMF estimates. Both countries now face economic uncertainty amid slowing global growth and rising trade tensions. Still, Kenya’s moment appears to have arrived, positioning it to take the economic crown of East Africa.

This article originally appeared in the North Africa Post