Africa growth hopes dim under fresh shocks

Sub-Saharan Africa’s growth is set to hold at 4.1% in 2026, but the World Bank has cut its earlier projection and warned that a more hostile external backdrop, led by conflict-linked jumps in fuel and fertiliser costs, is making the region’s recovery harder to sustain. The lender said the outlook had been revised down by 0.3 percentage points from its October 2025 estimate, even as governments across the region remain constrained by debt, inflation risks and weaker access to external finance.

The updated assessment, published in the World Bank’s latest Africa Economic Update, places the region under sharper scrutiny at a moment when policymakers are juggling the fallout from the Middle East war, tighter financial conditions and persistent domestic structural weaknesses. Median inflation, which eased from 4.4% in 2024 to 3.7% in 2025, is now projected to rise to 4.8% in 2026, according to the report, a shift the Bank ties largely to spillovers from the conflict.

That combination matters because many economies in the region are net importers of energy and farm inputs. Higher oil and fertiliser prices raise costs for transport, food production and household consumption at the same time, leaving governments with little room to soften the blow. Andrew Dabalen, the World Bank’s chief economist for Africa, said the downgrade reflected a much tougher external environment than policymakers had expected late last year, with uncertainty also building around investment flows from Gulf states that have become significant backers of projects in mining, renewable energy, property and information technology.

Debt is central to the Bank’s warning. The institution said high public debt and rising debt-service bills are crowding out development spending across low-income countries. Reuters reported that debt-servicing costs have climbed to about 18% of government revenues in 2025, up from 9% in 2017, while about half of African countries are either already in debt distress or at high risk of it. That leaves limited fiscal space for subsidies, food support or emergency relief at a time when imported inflation is threatening to hit poorer households the hardest.

The pain will not be spread evenly. Oil-importing and financially fragile economies in eastern and southern Africa are seen as particularly exposed, with Burundi, Malawi, Ethiopia, Kenya and Mozambique highlighted by Reuters as vulnerable under the World Bank’s analysis. Kenya faces the risk of a sharper inflation shock in a severe scenario, while Ethiopia is also exposed through labour links to the Gulf, where a prolonged downturn in employment could weaken remittance flows from migrant workers. West Africa’s picture is less settled, with the Bank signalling that fertiliser data for that sub-region are still incomplete.

Separate analysis released last week by two UN agencies, the African Union and the African Development Bank points in the same direction. That report warned that if the Middle East conflict lasts beyond six months, Africa could lose a further 0.2 percentage points of GDP growth in 2026 as trade, energy supplies and fertiliser shipments are disrupted. It also noted that the Middle East accounts for 15.8% of Africa’s imports and 10.9% of its exports, underlining why shipping stress and higher input costs are feeding so quickly into the continent’s outlook.

Food security is another fault line. A joint statement from the World Bank, IMF and World Food Programme said this week that sharp rises in oil, gas and fertiliser prices caused by the war will push up food prices and food insecurity, especially in low-income, import-dependent economies. That warning is especially relevant for Sub-Saharan Africa, where poorer households spend a large share of income on food and energy and are therefore more exposed to price spikes than consumers in richer economies.

Yet the World Bank’s update is not solely a crisis note. It argues that the region’s deeper challenge remains structural: low investment, weak productivity and limited job creation. The report makes the case for better-designed industrial policy to help countries capture demand in sectors such as critical minerals, pharmaceuticals, agro-processing, light manufacturing and digital services, provided those policies are matched by improvements in infrastructure, skills, finance and state capacity. On innovation, the Bank said most countries in the region still spend only 0.1% to 0.4% of GDP on research and development, well below the African Union benchmark of 1%. Kenya, Senegal and South Africa were cited as among the few that have come closer to that threshold.