Economic growth is speeding up in Africa...

The economic outlook for Sub-Saharan Africa is gradually improving despite a challenging global environment, with regional growth expected to accelerate from 3.3% in 2024 to 3.5% in 2025 and further to 4.3% in 2026/27.However, this positive trajectory is dampened by underperformance in major economies like Nigeria, South Africa and Angola. Excluding these nations, the rest of the region is forecast to grow at a more robust pace - 4.6% in 2025 and 5.7% in 2026/27. Nonetheless, these projections remain vulnerable to global uncertainties such as trade disruptions, geopolitical instability, and the impacts of climate change.According to a World Bank Group report released at the end of April, the key drivers of growth in the region will be household consumption and investment, supported by cooling inflation and relatively favourable financial conditions. However, public consumption is expected to remain subdued due to fiscal constraints, as governments struggle to juggle debt servicing with social and infrastructure investments.Sectorally, the services sector - buoyed by ICT, finance and tourism - will remain a strong contributor to GDP, while agriculture is set to recover following better weather conditions and technological improvements.Despite the overall growth acceleration, the region faces persistent risks. Global policy uncertainty may significantly disrupt trade and investment flows. Other downside risks include geopolitical fragmentation, declining foreign aid and extreme weather events, all of which threaten to reverse gains in economic performance. Prolonged uncertainty and international fragmentation could have far-reaching effects beyond immediate trade impacts, potentially undermining the region's long-term prospects.Still laggingIn terms of living standards, per capita income in Sub-Saharan Africa is still lagging. By 2025, real income per capita is projected to remain 2% below its 2015 peak. Although growth per capita is expected to average 1.8% annually from 2025 to 2027, the impact on poverty reduction will be modest. The poverty rate is projected to peak at 43.9% in 2025 before declining slightly to 43.2% by 2027. This slow pace of poverty reduction is due to limited investments in sectors that directly benefit the poor, the lingering effects of past inflation, and reduced donor aid.Inflation across the region has been on a downward trend, with the median rate falling from 7.1% in 2023 to 4.5% in 2024, and stabilising at 4.6% through 2025 to 2027. The easing of inflation is largely attributed to improved currency stability, supply chain normalisation, and tight fiscal and monetary policies. However, inflation rates remain high and uneven across the region; 14 of 47 countries still report double-digit inflation, although this is expected to fall to six countries by 2027.Monetary policies across Sub-Saharan Africa remain diverse. Many central banks have begun easing interest rates, though a few have raised rates in response to inflation flare-ups. Risks of renewed inflation - especially from global trade policy changes - may slow or reverse the easing cycle. Should tariffs or trade restrictions rise globally, African currencies could weaken, potentially stoking inflation further depending on the degree of cost pass-through.Fiscal frontOn the fiscal front, governments have made some progress in reducing primary deficits, with the regional average narrowing from 0.5% of GDP in 2024 to 0.3% in 2025. Continued efforts could shift balances to a surplus by 2026/27. However, elevated debt servicing costs, averaging 3.4% of GDP, limit fiscal space and crowd out essential public spending. In 2024, 20 out of 48 countries in the region spent more on debt servicing than on health and education combined.Public debt servicing remains a major fiscal challenge. From 2012 to 2019, debt servicing costs rose from 16% to 39% of revenues and now stand at around 50%. Although restructuring may help stabilise debt levels, future trends are uncertain. Governments must engage in further fiscal consolidation, liability management, and pro-growth reforms to reduce debt vulnerabilities.External debtThe region's external debt composition has shifted significantly. By 2025, Sub-Saharan Africa will owe about U$20 billion annually in interest payments, largely to private creditors and Chinese lenders. Since 2016, principal repayments have outpaced new disbursements, sharply reducing net inflows, from U$37.7 billion in 2016 to 2019, to U$18.4 billion in 2023.As private financing dwindles, multilateral institutions now provide the majority of financial support.Conflict and climate change pose serious threats to growth. Violent conflicts have escalated, particularly in Sudan and the Democratic Republic of Congo, displacing millions and destabilising economies. In 2024, the Sahel region accounted for over half of Islamist insurgency-related deaths in the subcontinent. These conflicts exacerbate food insecurity; about 120 million Africans face acute food shortages, 80% of whom live in conflict zones.Meanwhile, climate change continues to disrupt livelihoods and economic output. Floods, droughts and erratic weather patterns are increasingly common, affecting key crops like cocoa and reducing overall agricultural productivity. Governments often divert up to 9% of their budgets to disaster response, and economic losses from such events range from 2% to 5% of GDP. Adaptation costs are estimated at $30–50 billion annually over the next decade, hitting the poorest populations hardest.Improving governance is crucial to sustaining growth and ensuring equitable outcomes. The state’s failure to provide peace, security, and opportunities has led to political unrest, the rise of non-state armed groups, and a wave of military coups. Conflicts now primarily involve internal actors, such as militias, insurgents, and criminal networks, further complicating state-building and development.ReformsGovernance reforms can help create broad-based economic opportunities through three key mechanisms: enhancing public trust by improving fiscal transparency and service delivery; building investor confidence by strengthening legal and regulatory institutions; and reinforcing market oversight through independent agencies that foster competition. These reforms are essential to shift economies toward inclusive, job-rich growth.Political unrest has risen steadily, with protests increasing by 12% annually over the past decade and conflict-related casualties nearly tripling between 2014 and 2024. Economic grievances fuel instability, while political turmoil, in turn, suppresses investment and productivity. Where political power is concentrated, elites often dominate policy decisions, undermining inclusive governance and effective service delivery.To build durable political support, governments must demonstrate tangible improvements in citizens' lives. This can be achieved by enhancing service delivery and tax equity.Currently, access to public services remains highly unequal, and nonmonetary poverty exceeds 50%. Weak accountability mechanisms, especially in public services and taxation, allow wealthier segments to evade taxes and enjoy exemptions, while the poor bear the burden of weak public provision.Strengthening tax collection and service provision requires transparency, reduced corruption, and the effective use of technology. Regulatory reforms should promote competition and job creation. Yet, dominant firms, often with political ties, resist competition, and weak enforcement limits market entry for small and medium-sized enterprises. Public procurement, state-owned enterprises, and public-private partnerships often reflect narrow political interests rather than inclusive development goals.In summarySub-Saharan Africa faces a mixed outlook. While economic growth is accelerating, the pace remains uneven and fragile. Deep-seated issues - conflict, climate change, debt burdens and poor governance - continue to weigh on development prospects. Real transformation will require bold governance reforms, renewed commitment to inclusive economic policies, and coordinated efforts to build resilience against shocks. Without these, the region risks missing the opportunity to translate growth into tangible improvements in livelihoods and equity.

Economic growth is speeding up in Africa...

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Allgemeine Zeitung 2025-07-24

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Economic growth is speeding up in Africa...

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Allgemeine Zeitung 2025-07-24

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