The IMF forecasts Kenya’s gross domestic product (GDP) to reach $132 billion in 2025, surpassing Ethiopia’s projected $117 billion. This economic milestone comes despite Kenya’s recent political and fiscal turbulence, highlighting the strength of its diversified economy and robust external inflows.
The rise follows several positive indicators in 2024, including a 21% appreciation of the Kenyan shilling—making it the best-performing currency globally—and record-high diaspora remittances of $4.94 billion. Additionally, a successful $1.5 billion Eurobond issuance helped bolster foreign reserves and confidence in Kenya’s fiscal trajectory.
In its latest regional economic outlook, the IMF upgraded Kenya’s 2025 growth forecast to 4.8%, up from 4.5% in 2024. Growth is expected to stabilize at 4.9% in 2026, cementing Kenya’s position as one of Sub-Saharan Africa’s most dynamic economies.
Policy Reforms and Investor Optimism Drive Momentum
Though the country faced domestic unrest linked to the Finance Bill 2024—an unpopular tax reform package that led to widespread protests—Kenya’s economic management has gained international approval. A March 2025 survey by the Central Bank of Kenya revealed high business optimism for the next 12 months, citing favorable weather, currency stability, and expectations of declining interest rates.
The government’s broader policy agenda, aimed at fiscal consolidation and debt sustainability, has helped reassure markets despite Kenya’s withdrawal from a $3.6 billion IMF-supported program earlier this year.
Ethiopia Faces Headwinds Despite Financial Support
Meanwhile, Ethiopia—long regarded as the region’s economic engine—has encountered major economic disruptions. The country devalued its currency by over 55% in 2024, unlocking $3.4 billion in IMF funding and $16.6 billion in World Bank support. While the move has eased external debt pressure, it triggered inflation spikes and import cost surges, compounding the economic strain from internal conflict and climate-related disruptions.
Ethiopia’s growth trajectory remains uncertain, even as external funding helps stabilize the short term. Structural weaknesses in the economy, particularly its dependence on state-led infrastructure and a closed market system, have become more apparent under stress.
Regional Outlook: A Mixed Picture
Kenya’s economic outlook contrasts with a more subdued forecast across the East African region. While Tanzania and South Sudan also saw upward growth revisions, countries like Uganda, Rwanda, Burundi, and the Democratic Republic of Congo are facing downgraded projections due to regional instability and global trade tensions.
Across Sub-Saharan Africa, the IMF expects overall GDP growth to decline slightly to 3.8% in 2025, down from 4.0% in 2024. The global economy is also expected to slow, growing at 2.8%, a drop from 3.3% last year, amid rising protectionist trade policies and geopolitical uncertainty.
Kenya at a Turning Point
Kenya’s anticipated rise to the top of East Africa’s economic rankings signals more than just a shift in numbers—it reflects the growing importance of open-market policies, fiscal prudence, and investor confidence in navigating today’s volatile economic landscape.
As global growth slows and traditional economic models are tested, Kenya’s steady performance underscores the value of diversification, institutional reforms, and proactive economic governance. If sustained, the country’s current trajectory could set the tone for broader economic transformation across the region.
