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Kenya Overtakes Ethiopia As East Africa Largest Economy Again

Kenya has overtaken Ethiopia as East Africa’s largest economy after five years of trailing, according to latest GDP data and IMF estimates. The development marks a significant shift in the regional economic balance of power, with Nairobi reclaiming its position as the economic hub of East Africa.

Data shows Kenya’s GDP grew to over $125 billion in nominal terms, buoyed by strong performance in services, agriculture, fintech, tourism and infrastructure investment, while Ethiopia’s economy faced headwinds from conflict, drought, currency devaluation and debt restructuring challenges. The Kenyan shilling’s stabilization and rebound in investor confidence also contributed to the surge.

Ethiopia had overtaken Kenya in 2020 and held the top spot due to rapid industrial park expansion and public investment, but the Tigray conflict, macroeconomic imbalances and suspension of foreign aid slowed momentum. Kenya, meanwhile, leveraged its diversified economy and private sector resilience to stage a comeback.

Economists say Kenya’s lead reflects its role as a financial, logistics and tech hub for the region, hosting the headquarters of numerous multinational firms, startups and development agencies. The Mombasa Port, Nairobi Stock Exchange and robust mobile money ecosystem continue to attract foreign direct investment.

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For Ghana and West Africa, the Kenya-Ethiopia shift offers lessons on economic diversification, currency management and investment climate reforms under President Mahama’s Resetting Ghana agenda. Analysts note that East Africa’s competition mirrors West Africa’s rivalry between Nigeria, Ghana and Ivory Coast for investment.

The latest ranking does not diminish Ethiopia’s long-term potential, given its 120 million population and manufacturing base. Both economies remain key drivers of African growth, and regional integration under the African Continental Free Trade Area (AfCFTA) is expected to benefit both countries. Full report: https://zurl.co/tjPGs

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Author: Stella Sunu • Published on Howedey.com

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