Kenya has reclaimed its position as East Africa’s largest economy, overtaking Ethiopia after five years in which its neighbour held the regional lead.

According to the latest International Monetary Fund (IMF) figures, Kenya’s economy was valued at about $135.92 billion in 2025, compared with $126.35 billion for Ethiopia. The shift means Kenya has regained the economic lead it lost to Ethiopia in 2020. 

Kenya’s nominal GDP in dollar terms increased by about 13.7 percent, while Ethiopia’s fell by roughly 40 percent. The dramatic change, however, does not mean Ethiopia’s economy suddenly collapsed.

The main factor behind Ethiopia’s decline in dollar-denominated GDP was the sharp devaluation of the Ethiopian birr. Ethiopia loosened its control over the exchange rate in 2024 as part of reforms linked to a $3.4 billion IMF financing programme. The birr subsequently lost more than a third of its value against the US dollar.

Despite the fall in its dollar-valued GDP, Ethiopia continued to record much faster real economic growth than Kenya. The IMF figures show that Ethiopia’s economy grew by about 9.2 percent in 2025, compared with 4.6 percent growth in Kenya.

The reversal therefore largely reflects currency movements and how the two economies are measured in US dollars rather than a collapse in Ethiopia’s actual economic production.

Kenya also benefited from the recovery of the Kenyan shilling against the dollar, which increased the value of its economy when converted into US currency.

The latest figures place Kenya as Africa’s seventh-largest economy, behind South Africa, Egypt, Algeria, Morocco, Angola and Nigeria. The IMF projects that Kenya could overtake Angola in 2028, potentially moving up to sixth position on the continent.

Kenya’s return to the top of East Africa comes after Ethiopia enjoyed a five-year period of regional dominance, driven by strong investment in infrastructure, agriculture, manufacturing and services.

The two countries remain major economic competitors in the region, particularly in areas such as manufacturing, aviation, trade and investment. Kenya is positioning Nairobi as a major regional business and aviation hub, while Ethiopia continues to benefit from its large population and rapidly expanding economy.

The IMF’s latest 2026 projections show that Kenya is expected to grow by about 4.5 percent, while Ethiopia is projected to record much stronger real growth.

Although Kenya now has the larger economy when measured in current US dollars, Ethiopia remains a major regional economic power. Its faster real growth rate means the competition between the two countries for East Africa’s economic leadership is likely to continue.

The latest figures therefore mark a significant change in East Africa’s economic rankings, with Kenya reclaiming the regional crown largely because of currency valuation changes and the relative strength of the Kenyan shilling.