A dramatic shift is unfolding in the East Africa region, as Kenya is poised to snatch back the regional crown from long-time rival, Ethiopia.
The latest IMF projections, in accordance with the World Economic Outlook, April 2025, reveal Kenya’s GDP is set to increase and reach Sh17.13 trillion ($131.67 billion) in 2025, finally overtaking Ethiopia’s Sh15.19 trillion ($117.46 billion) GDP.
This economic coup caps years of Ethiopia’s dominance, which held for over 5 years, unraveling amid perfect storms of conflict and crisis, while Kenya’s resilient, tech-driven economy quietly built momentum for this takeover. Just five years ago, Ethiopia’s economy stood a commanding 25% larger than Kenya’s.
However, its breakneck growth – once the envy of many developing nations – has been derailed by civil war, devastating drought, and suffocating debt distress. In fact, Ethiopia’s recent move to liberalize its exchange rate system, allowing the birr to depreciate by more than 55%, played a major role in its fall in GDP.
The bold move definitely allowed the country to unlock a critical Sh442.37 billion ($3.4 billion) IMF loan package and an additional Sh2.16 trillion ($16.6 billion) in financial support from the World Bank, while paving the way for negotiations to restructure at least half of its Sh3.76 trillion ($28.9 billion) external debt burden.
However, it also saw the economy take a hit, as the cost of imports increased greatly. Meanwhile, even though Kenya continues to face a number of challenges as well, such as mismanagement and corruption, the economy continues to appear stable, despite many on the ground experiencing something different.
With the Kenyan Shilling having appreciated, and coming out as the world’s best-performing currency in 2024, as well as having a diversified economy, its forecast has finally seen it set to reclaim the throne. Mounting debt servicing costs and a volatile shilling continue threatening to undermine the new leader’s status.
Ethiopia, though battered, retains formidable potential with Africa’s second-largest population and untapped resources. It is clear this economic rivalry is far from settled. But for now, Kenya is set to be the new economic heavyweight of East Africa.
