Kenya is projected to become East Africa’s largest economy this year, surpassing Ethiopia, according to the International Monetary Fund’s April 2025 World Economic Outlook.
The IMF projects Kenya’s Gross Domestic Product (GDP) to grow to $132 billion in 2024, up from $117 billion last year. In contrast, Ethiopia’s GDP is expected to drop to $117 billion in 2025 from $143 billion registered in the past year.
This shift is primarily attributed to the Ethiopian Birr’s devaluation following the liberalization of the country’s exchange rate system in July 2024.
While this move helped Ethiopia to unlock a $3.4 billion loan from the IMF, it caused its currency to depreciate by approximately 55% against the US dollar. Birr devaluation has also led to increased import costs and inflation.
Kenya, on the other hand, has experienced greater economic stability and resilience. In 2024, The Kenyan Shilling appreciated by approximately 21% against major currencies, making it one of the best-performing currencies in the word.
The continued Shilling’s strength is primarily driven by several factors, including the successful $1.5 billion Eurobond issuance in February this year and the nation’s adequate foreign exchange reserves.
IMF revised its growth forecast for Sub-Saharan Africa downward, forecasting a 3.8% increase in the region’s GDP in 2025. This figure marks the slowest pace since the severe economic downturn experienced during the COVID-19 pandemic.
The downward revision in the region’s GDP growth is partly due to concerns about the potential impact of Trump’s tariffs on global economic growth.
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