Kenya Overtakes Ethiopia as East Africa’s Largest Economy After Five Years
Kenya has reclaimed its position as East Africa’s largest economy, overtaking Ethiopia after five years of trailing its neighbour, according to the International Monetary Fund’s (IMF) latest economic estimates.
A report published by Business Daily on Thursday, October 15, 2026, says Kenya’s nominal Gross Domestic Product (GDP) reached $135.92 billion (approximately KSh 17.57 trillion) in 2025, compared with Ethiopia’s $126.35 billion.
The figures give Kenya an economic lead of approximately $9.57 billion, equivalent to about KSh 1.24 trillion.
The shift follows major currency reforms in Ethiopia, where the government eased controls on the birr in 2024 as part of an economic reform programme linked to a $3.4 billion IMF financing package.
The subsequent depreciation of the Ethiopian currency significantly reduced the dollar value of the country’s economic output, allowing Kenya to regain the regional lead.
Despite losing its position in the dollar-denominated GDP rankings, Ethiopia recorded stronger real economic growth. Its economy expanded by 9.2 per cent in 2025, more than twice Kenya’s 4.6 per cent growth rate, according to the report.
Kenya’s nominal GDP, measured in US dollars, rose by 13.7 per cent to $135.92 billion during the same period.
The development highlights the influence of exchange rates on international economic rankings, demonstrating that a country’s position by dollar-denominated GDP does not necessarily reflect how quickly its economy is growing.
Kenya now ranks as Africa’s seventh-largest economy, while Ethiopia has fallen to eighth place in the continental rankings cited in the report.
The two countries continue to compete for regional influence in sectors including manufacturing, aviation, agriculture, exports and foreign investment.
The IMF’s estimates therefore mark a significant change in East Africa’s economic rankings, although measures such as GDP per capita, household incomes, employment and productivity remain important when assessing living standards.
