AfDB Forecasts Africa’s Economy to Grow 4.2% in 2026 Despite Global Pressures

Africa's economy is projected to grow by 4.2 percent in 2026, slightly moderating from an estimated 4.4 percent growth in 2025, before rebounding again to 4.4 percent in 2027, according to the 2026 African Economic Outlook released during the African Development Bank Group's Annual Meetings in Brazzaville, Republic of Congo.

The report highlights Africa's continued economic resilience despite mounting global challenges, including geopolitical tensions, tighter international financial conditions, supply chain disruptions, and rising energy costs.

Published under the theme "Mobilizing Africa's Development Financing at Scale in a Fragmented World," the flagship report argues that Africa must significantly strengthen its ability to mobilise and deploy capital if it is to sustain faster, more inclusive, and resilient growth.

Africa Remains One of the World's Fastest-Growing Regions

According to the African Development Bank, economic growth across the continent in 2025 was supported by:

• Improved macroeconomic management

• Stronger agricultural production

• Elevated commodity prices

• Ongoing structural reforms

The report notes that Africa continues to rank among the world's fastest-growing regions, with 22 African countries projected to record growth above 5 percent in 2025.

However, the Bank stressed that maintaining momentum will require major reforms to:

• Improve domestic resource mobilisation

• Deepen financial markets

• Expand capital markets

• Strengthen Africa's influence within the global financial system

Mixed Regional Economic Outlook

The report presents a varied economic outlook across Africa's regions.

East Africa

East Africa is expected to remain the continent's fastest-growing region, although growth is forecast to ease from 6.6 percent in 2025 to 5.9 percent in 2026 due to higher energy and import costs linked to disruptions in the Middle East. Growth is expected to rebound to 6.4 percent in 2027.

West Africa

West Africa is projected to maintain relatively stable growth at 4.7 percent in 2026, broadly similar to the estimated 4.8 percent in 2025. Strong agricultural production and continued infrastructure investment are expected to support the region's economy.

North Africa

North Africa's growth is forecast to slow to 4.0 percent in 2026 from 4.4 percent in 2025, reflecting weaker tourism demand from Gulf countries and continuing supply chain disruptions.

Central Africa

Central Africa is among the few regions expected to record improved growth, rising slightly to 3.8 percent in 2026 from 3.6 percent in 2025, supported by sustained high oil prices.

Southern Africa

Growth in Southern Africa is expected to remain subdued at 2.1 percent in 2026 compared with 2.3 percent in 2025, due to weaker mining output, lower agricultural production, and rising energy costs.

Risks Remain Significant

The African Development Bank warned that major downside risks continue to threaten the continent's economic outlook.

Inflation across Africa is projected to remain elevated at 10.4 percent in 2026, placing continued pressure on macroeconomic stability.

The report highlighted several ongoing risks, including:

• Persistent geopolitical tensions

• Prolonged energy and supply chain disruptions

• Rising fertiliser and fuel costs

• Financial market volatility

• Currency depreciations

• Increasing debt vulnerabilities

• Reduced external financing flows and official development assistance

Africa Faces Annual Development Financing Gap Above $1.3 Trillion

One of the report's most significant findings concerns Africa's widening development financing gap.

According to the report, Africa requires more than $1.3 trillion annually to meet the Sustainable Development Goals (SDGs).

The African Development Bank attributed this financing shortfall to:

• Weak domestic revenue mobilisation

• Limited financial intermediation

• Tightening global financing conditions

However, the Bank argued that the issue is not solely a shortage of resources, but also a question of how effectively capital is mobilised and deployed.

Untapped Potential for Capital Mobilisation

The report estimates that Africa could potentially unlock up to $1.43 trillion annually through reforms and better financial management.

Key opportunities identified include:

• $469 billion annually from stronger tax and non-tax revenue collection

• Approximately $299 billion in savings through improved public investment efficiency

• Reduced illicit financial flows and corruption

• Expanded public-private partnerships

• Greater use of diaspora financing

• Better utilisation of natural capital assets

The report noted that each additional dollar of public investment can generate around $1.40 in private investment, highlighting the importance of public-private partnerships in driving infrastructure and productive sector growth.

Vast Institutional Investment Potential

The Bank also pointed to Africa's largely untapped institutional investment sector.

Institutional investors — including pension funds, insurance companies, and sovereign wealth funds — collectively manage around $4 trillion in assets, yet less than 2.7 percent is currently invested in African infrastructure and productive sectors.

The report called for stronger integration of African financial systems through:

• Pan-African banking institutions

• Integrated capital markets

• Climate finance instruments

• Islamic finance mechanisms

New African Financial Architecture Proposed

A major focus of the report is the proposed New African Financial Architecture for Development (NAFAD), which aims to leverage more than $4 trillion in assets within Africa's financial ecosystem.

The report also highlighted the launch of the African Credit Rating Agency in January 2026, designed to address concerns about perceived biases in sovereign credit risk assessments affecting African countries.

Although Africa's total stock market capitalisation reached $1.2 trillion in 2024 — nearly six times higher than two decades ago — activity remains heavily concentrated in:

• South Africa

• Egypt

• Nigeria

• Morocco

The Bank said broader market integration will be essential for expanding financing opportunities across the continent.

Focus on Financial Stability and Debt Management

The report further emphasised the importance of advancing initiatives such as the African Financing Stability Mechanism, aimed at:

• Easing liquidity pressures

• Strengthening financial stability

• Helping African countries manage debt refinancing risks at lower cost

The findings underscore growing urgency for Africa to strengthen domestic financing systems and reduce dependence on volatile external funding sources as the continent seeks to accelerate development in an increasingly fragmented global economy.