Africa’s economy is projected to increase from 3.3% growth in 2024 to 3.9% in 2025, reaching 4% in 2026, despite mounting geopolitical uncertainties and trade tensions, the African Development Bank Group said Tuesday in its flagship 2025 African Economic Outlook report.
While East Africa leads with a projected 5.9% growth in 2025-2026, the region will be driven by resilience in Ethiopia, Rwanda, and Tanzania, as Kenya continues to lag behind due a slowdown in growth.
Despite the prevailing domestic and external challenges Africa continues to demonstrate notable resilience. The report, titled “Making Africa’s Capital Work Better for Africa’s Development,” was released during the Bank Group’s 2025 Annual Meetings, taking place in Abidjan, Côte d’Ivoire. It demonstrates the continent’s capacity to weather multiple shocks while identifying pathways to unlock a vast potential for transformation.
Strong growth outlook
According to the report, 21 African countries will achieve growth exceeding 5% in 2025, with four countries—Ethiopia, Niger, Rwanda, and Senegal — potentially reaching the critical 7% threshold required for poverty reduction and inclusive growth.
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Africa’s projected growth rates will surpass the global average and outpace most other regions except emerging and developing Asia. Africa’s continued resilience is built on effective domestic reforms and improved macroeconomic management.
Mixed regional growth performance
Growth prospects vary significantly across regions: East Africa leads with a projected 5.9% growth in 2025-2026, driven by resilience in Ethiopia, Rwanda, and Tanzania. West Africa maintains solid 4.3% growth, driven by new oil and gas production coming onstream in Senegal and Niger.
In the face of persistent headwinds, North Africa is expected to register 3.6% growth in 2025. In Central Africa, growth is projected to slow to 3.2% and Southern Africa will grow at only 2.2%, with its largest economy, South Africa, expected to achieve only 0.8% growth .
Significant challenges persist. Fifteen countries are experiencing double-digit inflation, while interest payments now consume 27.5% of government revenue across Africa, up from 19 percent in 2019.
“Africa must now face the challenge and look inwards to mobilizing the resources needed to finance its own development in the years ahead,” said Prof. Kevin Chika Urama, Chief Economist and Vice President of the African Development Bank Group, presenting the report’s findings.
The AEO 2025 estimates that, with the right policies, Africa could mobilize an additional $1.43 trillion in domestic resources from tax and non-tax revenue sources through efficiency gains alone. Africa’s extraordinary but underutilized resource base includes:
Natural capital: Africa hosts 30 percent of global mineral reserves and could capture over 10 percent of the projected $16 trillion in revenues from key green minerals by 2030.
Human capital: The continent’s median age of 19 represents a demographic dividend that could add $47 billion to Africa’s GDP through improved workforce participation.
Financial capital: Pension fund assets have grown to $1.1 trillion, while formal remittances could reach $500 billion by 2035 if transfer costs are reduced
Business capital: Full implementation of the African Continental Free Trade Area could increase exports by $560 billion and boost continental income by $450 billion by 2035.
The report stresses that massive capital outflows are undermining the continent’s development. Compared to $190.7 billion of financial inflows received in 2022, Africa lost approximately $587 billion from financial leakages. Of this, around $90 billion was lost to illicit financial flows, a further $275 billion siphoned away by multinational corporations shifting profits, and $148 billion lost to corruption.
“When Africa allocates its own capital (human, natural, fiscal, business and financial) effectively, global capital will follow Africa’s capital to accelerate investments in productive sectors in Africa,” Mr Urama said.
Key policy recommendations
“There can be no substitute to sound macroeconomic policy management, quality institutions and good governance and rule of law,” VP Urama said, emphasizing the vital need to bolster governance.
The report also calls for comprehensive reforms across several critical areas. On fiscal revenue mobilization, it recommends enhancing tax administration through digitization, broadening national tax bases, and strengthening social contracts with citizens to improve compliance. It advocates making natural capital accounting mandatory and enforcing domestic value retention through beneficiation requirements.
The AEO also emphasizes the need to deepen financial markets by tapping institutional savings, developing local currency bond markets, and harmonizing regulatory frameworks to facilitate cross-border investment. (AMA)
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