The International Monetary Fund (IMF) has recently projected that the economies of Ethiopia and Angola are set to overtake Kenya in terms of size, potentially weakening Kenya's ability to attract investors with its growing consumer market.
According to the IMF, faster GDP growth in Angola and Ethiopia will see Kenya relegated to the fifth spot in sub-Saharan Africa's economic rankings. Nigeria is projected to remain the largest economy on the continent, while Angola's return to growth, linked to higher oil prices, saw the country overtake Kenya last year, ending years of recession.
On the other hand, Ethiopia is set to replace Kenya in fourth position this year, driven by the easing of armed conflict in the country and the continuation of ambitious economic reform efforts aimed at opening up one of Africa's fastest-growing but most closed economies.
The IMF expects the economies of Ethiopia and Angola to expand by 13.5 per cent and 8.6 per cent, respectively, on dollar terms this year. However, Kenya is projected to record a slower growth of 2.4 per cent in the review period as the country grapples with the aftershocks of the Covid-19 pandemic, drought, election jitters, and disruption of global supply chains by the Russia-Ukraine war.
It's worth noting that the relegation of Kenya to the fifth position will weaken its hand in the race for foreign direct investment (FDI), which is critical in easing the growing youth unemployment on the continent. So far, South Africa and Ethiopia have fared better than Kenya in attracting foreign investments, with investors eyeing a population that has more cash to spend. The IMF projects Kenya's GDP to hit $117.6 billion this year, behind Nigeria ($574 billion), South Africa ($422 billion), Angola ($135 billion) and Ethiopia ($126.2 billion).
Multinational companies are increasingly interested in Africa as a market with many opportunities, from mobile phones, cars, food, and clothes to financial services and entertainment, as millions of Africans aspire to claw their way out of widespread poverty.
Oil-rich Angola will reclaim its third position, which it lost to Kenya in 2020 following years of contraction due to a slump in oil prices. According to OPEC, Angola is the continent's second-largest oil producer after Nigeria, while Kimberley Process data ranks it as the world's seventh-biggest producer of rough diamonds. After five years of recession, Angola's GDP increased by 0.7 per cent in 2021, according to the World Bank.