Kenya overtakes Ethiopia as Eastern Africa's largest economy with $151.15b GDP

• Kenya surpassed Ethiopia in 2025 to reclaim its position as East Africa's largest economy, ending Ethiopia's five-year lead
• Ethiopia's dollar-denominated GDP plunged nearly 40% after the country loosened exchange-rate controls to secure a $3.4b IMF loan
• The IMF expects Kenya to retain its regional lead and potentially overtake Angola by 2028 to become Africa's sixth-largest economy

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TUKO.co.ke journalist Japhet Ruto has over eight years of experience in financial, business, and technology reporting, offering insights into Kenyan and global economic trends.

Kenya has reclaimed its title as Eastern Africa's largest economy, overtaking Ethiopia after a dramatic shift in the regional economic rankings, according to the International Monetary Fund's October 2026 World Economic Outlook report.

IMF data shows Kenya's GDP grew 13.7% in 2025 to reach $135.92 billion (KSh 17.57 trillion), while Ethiopia's dollar-denominated GDP fell by nearly 40% to $126.35 billion, creating a gap of $9.57 billion between the two nations.

What is Kenya's GDP in October 2026?

By October 2026, the IMF indicated Kenya's GDP had climbed further to $151.15 billion, compared to Ethiopia's $127.15 billion.

The shift ended five years of Ethiopian dominance in the regional rankings, during which Addis Ababa held the top spot.

Kenya moved up to seventh place among Africa's largest economies, while Ethiopia dropped to eighth, a steep fall from its 2024 GDP of $210 billion.

How currency movements drove the shift

The numbers, however, tell a more nuanced story. In real terms, Ethiopia's economy actually expanded faster, posting 9.2% growth in 2025 against Kenya's 4.6%, meaning exchange-rate fluctuations rather than underlying economic performance were the principal driver of the reversal.

Ethiopia's currency, the birr, lost more than a third of its value against the dollar after Addis Ababa abandoned its tight exchange-rate controls in the second half of 2024, a condition tied to securing a four-year, $3.4 billion IMF loan.

Charlie Robertson, chief economic adviser to Equity Group Holdings CEO James Mwangi, noted that the currency had been significantly overvalued.

"That was just the currency effect," Robertson said, adding that the birr was roughly 50% overvalued two years earlier but is now approximately 20% undervalued.

Kenya's own currency recovery also played a role, boosting the country's GDP in dollar terms as the shilling strengthened.

Looking ahead, the IMF projects Kenya will hold onto its East African lead and could surpass Angola as early as 2028, which would place it among the six largest economies on the continent.

How did other EAC economies fare?

In related news, Kenya’s economy is about $28.87 billion larger than that of the Democratic Republic of Congo (DR Congo), highlighting the gap between the two countries in terms of economic output.

The country’s GDP is also nearly twice the size of Tanzania’s economy, placing Kenya ahead of its East African neighbours in the regional rankings.

Burundi ranks at the bottom, with an economy roughly 20 times smaller than Kenya’s, underscoring the significant differences in economic size among countries in the region.

Source: TUKO.co.ke