According to a projection by the International Monetary Fund (IMF), Kenya is set to surpass Angola and claim the title of the fourth-largest economy in sub-Saharan Africa this year. This forecast positions Kenya behind South Africa, Nigeria, and Ethiopia in economic stature, a ranking it’s anticipated to maintain until the conclusion of 2029.
In the previous year, Kenya witnessed an estimated increase in GDP to $108.9 billion (equivalent to Sh15.14 trillion, using the current exchange rate) from $113.7 billion (Sh13.37 trillion based on the then-existing rate) in 2022.
Meanwhile, Ethiopia, having widened its lead over Kenya, is expected to outpace Nigeria within two years, securing the position of the second-largest economy in the region. Ethiopia’s economic expansion, which outpaced Kenya’s in 2020, is highlighted by an estimated surge to $159.74 billion (equivalent to Sh21.165 trillion) in 2023, further distancing itself from Kenya. Projections suggest Ethiopia will maintain this second position for the subsequent three years up to 2029.
However, concerns linger regarding the accuracy of Ethiopia’s reported GDP. The country emerged from a debilitating two-year civil conflict in 2022, impacting its economic stability. Additionally, Ethiopia is among the African nations grappling with debt obligations, having defaulted on a payment. Critics, including Charlie Robertson from FIM Partners UK Ltd, question Ethiopia’s official exchange rate, labeling it as inflated compared to actual market realities.
Ethiopia’s reported GDP growth of 7.2 percent in the previous year, according to IMF estimates, outpaced Kenya’s more modest 5.5 percent growth in 2023. Kenya, affected by drought and global financial market constraints due to geopolitical tensions such as the Ukraine conflict, experienced a slower economic expansion.
Notably, in 2022, Ethiopia’s GDP surpassed Kenya’s, bolstered by its recovery from the civil conflict. A robust GDP serves as a magnet for investors, reflecting a robust economy. Despite Ethiopia’s higher GDP projections, some experts question the reliability of such forecasts, particularly in light of doubts surrounding Ethiopia’s exchange rate.
The IMF’s World Economic Outlook for April 2024 underscores Ethiopia’s anticipated economic superiority over Kenya. However, skeptics point to discrepancies in Ethiopia’s exchange rate, which may skew GDP comparisons.
Ethiopia’s recent economic challenges, including civil unrest and debt defaults, have led to its classification as Africa’s third defaulter. Conversely, Kenya’s economic resilience amidst regional challenges positions it as a formidable player in sub-Saharan Africa.
Ultimately, while GDP figures provide a numerical perspective, nuances such as market dynamics and geopolitical stability shape investors’ perceptions of economic strength. With ongoing debates surrounding Ethiopia’s economic indicators, the landscape of sub-Saharan Africa’s economic hierarchy remains dynamic and subject to interpretation.
