East Africa’s largest economy to shift from Ethiopia to Kenya, IMF projects
Kenya has been ticked to surpass Ethiopia as East Africa’s largest economy this year, according to the latest projections from the International Monetary Fund (IMF).
The IMF estimates Kenya’s gross domestic product (GDP) will rise to $132 billion in 2024, overtaking Ethiopia’s expected $117 billion, marking a significant economic milestone for the region.
The shift comes amid divergent monetary policies and economic circumstances in the two neighbouring countries. Ethiopia’s decision to devalue its currency, the birr, by more than 55% against the U.S. dollar last year played a key role in altering the economic balance. The sharp devaluation, part of an exchange rate liberalisation strategy, enabled the country to unlock a $3.4 billion loan package from the IMF and an additional $16.6 billion in financial support from the World Bank.
Ethiopia also initiated negotiations to restructure at least half of its $28.9 billion in external debt, according to Bloomberg.
Meanwhile, Kenya has experienced a different trajectory. Its currency, the Kenyan shilling, appreciated by approximately 21% in 2024, making it the world’s best-performing currency.
While Kenya’s economy is expected to edge ahead, it still faces notable challenges. President William Ruto’s government has come under fire over controversial tax hikes and deficit-reduction measures. The fiscal tightening triggered mass protests in 2023, raising questions about the political sustainability of some of the government's economic reforms.
Nevertheless, Kenya’s diversified economy, stable financial sector, and relatively sound monetary policy have helped it maintain economic balance.
