Kenya has overtaken Ethiopia to become East Africa’s largest economy, ending a five-year period of regional dominance. According to International Monetary Fund data, currency reforms and a sharp devaluation of the Ethiopian birr drove the shift in dollar-denominated gross domestic product rankings.
The economic hierarchy in East Africa has shifted after a dramatic currency adjustment in Addis Ababa ended Ethiopia’s five-year reign as the region’s top economic power. Figures from the International Monetary Fund place Kenya’s nominal Gross Domestic Product at $135.92 billion in 2025, roughly equivalent to Sh17.57 trillion, while Ethiopia’s economy fell to $126.35 billion.
IMF Projections 2026:Angola🇦🇴:4.4%Benin🇧🇯:7.0%Côte d'Ivoire🇨🇮:6.0%DR Congo🇨🇩:5.2%Ethiopia🇪🇹:9.2%Ghana🇬🇭:5.7%Kenya🇰🇪:4.5%Nigeria🇳🇬:4.2%Rwanda🇷🇼:7.4%South Africa🇿🇦:1.0%South Sudan🇸🇸:10.5%Tanzania🇹🇿:6.0%Uganda🇺🇬:6.2%Zambia🇿🇲:5.6%Zimbabwe🇿🇼:5.0%https://t.co/yErn2Tnati pic.twitter.com/x6zJ4iqiWV
That $9.57 billion difference hands Nairobi the regional crown it last held in 2020. The turnaround pushed Kenya up to seventh place among the continent’s largest economies, trailing South Africa, Egypt, Nigeria, Algeria, Morocco, and Angola, according to the World Economic Outlook. Ethiopia slipped from seventh to eighth place globally within the African rankings.
Currency Shocks and the Birr Depreciation
The sudden change in economic standings was driven primarily by exchange-rate shifts rather than a collapse in Ethiopian domestic production. In July 2024, Ethiopia introduced a more market-determined exchange-rate system under a $3.4 billion financing programme supported by the International Monetary Fund. That policy change allowed the birr to depreciate significantly against the US dollar.
Consequently, Ethiopia’s dollar-denominated output contracted by nearly 40 percent from its 2024 valuation of $210 billion. Kenya’s economy, supported by a relatively stable shilling, expanded by 13.7 percent in dollar terms over the same period.
That was just the currency effect.
Charlie Robertson, chief economic adviser to Equity Group Holdings CEO James Mwangi, via Business Daily
Robertson noted that the birr was overvalued by roughly 50 percent two years prior, which inflated previous dollar-denominated GDP calculations. He suggested that the currency is now roughly 20 percent undervalued, meaning current dollar figures may understate the true scale of domestic economic activity inside Ethiopia.
Underlying Growth and Real Economic Output
While nominal dollar valuations favor Kenya, Ethiopia maintains a substantial advantage in real economic expansion and population size. International Monetary Fund estimates show Ethiopia’s economy expanded by 9.2 percent in real terms in 2025, more than twice the 4.6 percent growth recorded by Kenya.
When measured by purchasing power parity, which accounts for local price differences, Ethiopia retains a larger economy than Kenya. With an estimated population of 135.5 million people in 2025, Ethiopia stands as Africa’s second-most populous country behind Nigeria, offering manufacturers an immense domestic consumer base.
The currency reforms have nonetheless introduced practical changes for international commerce. Foreign companies operating in the region experienced immediate relief from long-standing capital controls, as Kenya Airways reported difficulties accessing approximately Sh1.5 billion previously frozen in Ethiopia due to foreign-exchange restrictions.
Security Challenges and Investment Competition
Beyond monetary policy, Ethiopia faces renewed security pressures that complicate its long-term investment outlook.
Kenya 🇰🇪 has overtaken Ethiopia 🇪🇹 to become the largest economy in East and Central Africa, according to IMF data. Kenya’s GDP is estimated at $151.15 billion, ahead of Ethiopia’s $127.15 billion and the Democratic Republic of the Congo’s roughly $122 billion.Ethiopia had… pic.twitter.com/VIhKXzx82F
Investment ambitions are further illustrated by major industrial proposals, including a proposed $16 billion refinery, which stands to strengthen Kenya’s status as a regional energy hub if completed.
Projected Economic Trajectory through 2028
International Monetary Fund projections indicate the economic gap between the two East African neighbors will expand significantly. Kenya’s GDP is projected to reach $151.15 billion by 2026, compared to $127.15 billion for Ethiopia, widening the differential between the nations to $24 billion.
Forecasters expect Kenya to maintain its regional lead and potentially surpass oil-producing Angola by 2028 to climb into sixth position among the largest national economies on the African continent.
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Kenya has finally pushed past Ethiopia to become the largest economy in East Africa, ending five years of Ethiopia sitting at the top, according to the latest IMF figures.In 2025, Kenya’s GDP hit about $136 billion (roughly Sh17.6 trillion), beating Ethiopia’s $126 billion. By… pic.twitter.com/xU6kkeCOE2
FACT: Kenya has overtaken Ethiopia as East Africa’s largest economy with a GDP of $151 billion according to the IMF. pic.twitter.com/4PQHalmaJF
Kenya has officially overtaken Ethiopia as East Africa’s largest economy, recording a GDP of Sh17.6 trillion compared to Ethiopia’s Sh16.4 trillion, according to updated IMF figures. But the story behind this headline rank shift isn't about productivity, it's about foreign…
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