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East Africa is set to lead regional performance, expanding at an average of 5.9 per cent in 2025–26, underpinned by continued momentum in Ethiopia, Rwanda, and Tanzania
Abidjan, Côte d’Ivoire | THE INDEPENDENT | Africa’s economy is forecast to grow from 3.3 per cent in 2024 to 3.9 per cent in 2025, and edge past 4 per cent by 2026, according to the African Development Bank’s flagship African Economic Outlook (AEO) 2025 report released on May 27 in Abidjan. The optimistic projection comes in spite of heightened global uncertainty, including geopolitical tensions and persistent trade disruptions.
The report, launched during the Bank’s annual meetings in Côte d’Ivoire, argues that the continent has demonstrated “notable resilience” to external and domestic shocks, bolstered by structural reforms and prudent macroeconomic management. It also underscores the urgent need for African economies to harness their internal capital more effectively.
“Africa must now face the challenge and look inwards to mobilise the resources needed to finance its own development in the years ahead,” said Prof Kevin Chika Urama, the AfDB’s Chief Economist and Vice President.
The report projects that 21 African countries will record growth above 5 per cent in 2025, with Ethiopia, Niger, Rwanda, and Senegal expected to exceed the 7 per cent mark—considered a threshold for meaningful poverty reduction and inclusive growth.
East Africa will lead in growth
East Africa is set to lead regional performance, expanding at an average of 5.9 per cent in 2025–26, underpinned by continued momentum in Ethiopia, Rwanda, and Tanzania. West Africa follows at 4.3 per cent, buoyed by hydrocarbon production in Senegal and Niger. North Africa is expected to grow by 3.6 per cent, while Central Africa’s outlook softens to 3.2 per cent. Southern Africa lags behind with projected growth of 2.2 per cent, dragged down by South Africa’s anaemic 0.8 per cent expansion.
However, macroeconomic vulnerabilities remain. Inflation is running in double digits in 15 countries, while interest payments have surged, now absorbing 27.5 per cent of total government revenues—up from 19 per cent in 2019.
The report’s central theme, “Making Africa’s Capital Work Better for Africa’s Development”, emphasises the imperative of mobilising untapped domestic resources. The Bank estimates that policy and efficiency improvements alone could unlock $1.43tn in additional financing from tax and non-tax sources.
Africa’s resource base is both extraordinary and underutilised. The continent holds 30 per cent of the world’s mineral reserves and stands to earn over 10 per cent of the $16tn expected global revenue from green minerals by 2030. It also has significant human capital, with a median age of 19 representing a potential demographic dividend that could add $47bn to GDP through improved labour participation.
Pension fund assets exceed $1.1tn
Financially, pension fund assets now exceed $1.1tn, and formal remittance flows could rise to $500bn by 2035 if transaction costs are lowered. On the trade front, full implementation of the African Continental Free Trade Area (AfCFTA) could add $560bn in export value and increase continental income by $450bn by 2035.
Yet despite these opportunities, financial leakages continue to drain the continent’s capital. In 2022, Africa attracted $190.7bn in capital inflows but lost an estimated $587bn to various outflows. Of this, $90bn was lost annually to illicit financial flows, $275bn to profit-shifting by multinationals, and $148bn to corruption.
“When Africa allocates its own capital—human, natural, fiscal, business and financial—effectively, global capital will follow,” said Urama.
Way forward
The report calls for bold reforms, including digitalising tax administration, broadening national tax bases, and building citizen trust to enhance compliance. It recommends integrating natural capital into national accounting systems and enforcing domestic value addition through beneficiation policies. The report also urges countries to deepen financial markets by tapping institutional savings, developing local currency bond markets, and harmonising regulatory frameworks to facilitate cross-border investments.
“There can be no substitute for sound macroeconomic policy management, quality institutions, good governance, and the rule of law,” said Urama, signalling that political will remains a critical variable in achieving the continent’s development ambitions.
As Africa edges closer to a 4 per cent growth trajectory, the AfDB insists that its long-term prosperity hinges not only on global capital but on how effectively it can marshal its own.
