Kenya overtakes Ethiopia as East Africa’s largest economy amid currency shifts

Kenya reclaimed its status as East Africa's largest economy in 2026 after five years, surpassing Ethiopia due to the depreciation of the Ethiopian birr. The International Monetary Fund's October 2026 World Economic Outlook reported Kenya's GDP at $135.92 billion for 2025, exceeding Ethiopia's $126.35 billion by $9.57 billion. This shift occurred despite Ethiopia maintaining higher real GDP growth.

Renewed security challenges in Ethiopia's Tigray region and concerns about the 2022 peace agreement have contributed to reduced foreign investment and economic instability. Kenya's economic leadership is now supported by currency movements and investor preferences, which have widened the GDP gap to $24 billion by 2026.