Economic prospects for Sub-Saharan Africa are weakening this year as rising debt and costly borrowing continue to strain government finances, according to economists at the World Economic Forum (WEF).
The latest outlook points to slower growth than in 2024, with limited room for governments to stimulate their economies or invest in long-term development.
The WEF’s survey of chief economists shows a clear decline in confidence. Fewer respondents now expect moderate growth, with the share falling from 57 per cent last year to 47 per cent. At the same time, pessimism has grown, as those forecasting weak growth increased sharply from 29 per cent to 40 per cent. Economists say the shift reflects mounting fiscal pressures and an increasingly uncertain global environment.
Inflation, however, is expected to remain relatively stable. Nearly two-thirds of economists foresee moderate inflation levels, with consumer prices continuing to ease on average. This trend offers some relief to households still grappling with the high cost of living experienced in recent years.
Despite easing inflation, policy flexibility remains limited. More than four in five chief economists expect central banks to keep monetary policy unchanged, while fiscal policy is also likely to stay largely the same. High debt servicing costs and constrained revenues mean governments have little space to introduce stimulus measures or expand public spending.
Rising public debt has emerged as one of the region’s biggest challenges. Borrowing across Africa has increased significantly since 2010, and more countries are turning to domestic markets for financing. The WEF warns that this trend could threaten financial stability, as local banks now hold a large share of government debt.
“More recently, domestic borrowing has started to surge, raising concerns about the vulnerability of local banks, which now hold around half of total government debt in the region,” the report read.
Debt levels
High debt levels are increasingly weighing on economic performance. As governments allocate a growing portion of their revenues to interest payments, fewer resources are left for investment in infrastructure, education, healthcare and industrial development. These sectors are essential for boosting productivity, creating jobs and supporting inclusive growth.
Debt pressures are also pushing governments to raise taxes in a bid to shore up revenues. This often comes through higher consumption taxes and levies, which tend to hit households and small businesses hardest. The result is weaker disposable income, reduced consumer spending and higher costs for businesses, all of which discourage private investment.
“High public debt fuels higher taxes that squeeze households and small businesses, weakening demand, investment, and job creation,” the report read.
Adding;
“When spending is trapped in wages and interest payments, borrowing sustains the past instead of building the productive future.”
At the same time, public spending in many countries remains heavily skewed toward recurrent costs such as wages, subsidies and interest payments. This leaves little room for capital expenditure that could stimulate growth. Rising interest obligations, in particular, create a cycle in which governments borrow more simply to meet existing commitments, further inflating debt without expanding the productive base of the economy.
Beyond Africa, the global outlook adds to the pressure. More than half of the chief economists surveyed expect global economic conditions to weaken in the year ahead. Debt distress, geopolitical tensions and shifting trade and investment patterns are cited as major downside risks, even as financial markets have so far remained resilient.
For Sub-Saharan Africa, this fragile external environment compounds domestic vulnerabilities. With public debt acting as a growing brake on growth, the region faces the challenge of balancing fiscal discipline with the need to invest in development, at a time when both domestic and global conditions are becoming increasingly difficult.
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