Following the devaluation of Ethiopia’s currency, Kenya is on course to surpass Ethiopia as the region’s largest economy by 2025.
According to the International Monetary Fund’s (IMF) most recent predictions, Kenya’s GDP will exceed $132 billion, surpassing Ethiopia’s predicted $117 billion.
The shift represents a dramatic shift in the regional economic hierarchy, driven by opposing policy choices and macroeconomic conditions in both countries.
Kenya has shown relative macroeconomic resilience. Market analysts predict that the Kenyan shilling would increase by 21% in 2024, making it the world’s best-performing currency.
The spike was fuelled by a successful $1.5 billion Eurobond offering, record-breaking diaspora remittances of $4.94 billion, and strong growth in agricultural and industry exports.
Despite strong fundamentals, Kenya has faced its share of domestic turbulence. The government’s controversial Finance Bill 2024, which introduced sweeping tax changes, sparked widespread public protests and led to significant investor losses. In response to the unrest, the government withdrew from a $3.6 billion, four-year IMF program, raising concerns over policy continuity.
Even so, Kenya’s economy remains relatively stable, thanks to its diversified structure and improved investor confidence.
Ethiopia had long been seen as East Africa’s economic powerhouse, buoyed by its large population and ambitious infrastructure projects. But recent economic headwinds have exposed vulnerabilities in its development model.
Meanwhile, Kenya’s open market strategy, diverse revenue streams, and currency stability have strengthened its regional position.
While both countries face prolonged economic uncertainty due to global trade tensions and inflationary pressures, Kenya appears to be in a stronger position in the immediate future.
If current trends continue, Kenya will formally become East Africa’s largest economy in 2025, marking a watershed moment in the regional economic landscape.
