Sub-Saharan Africa’s economies are projected to expand by 3.8% in 2025, an improvement from April’s forecast of 3.5%, as easing inflation and stabilised exchange rates boost policy flexibility and private investment, the World Bank said on Tuesday.
In its biannual Africa Pulse report, the Bank attributed the upgrade to improved economic conditions in countries such as Ethiopia, where lower inflation and stronger currency performance have allowed for interest rate cuts.
“These favourable conditions are fuelling a recovery in private consumption and investment,” the report noted, although it warned that fiscal consolidation could limit growth in some countries.
The Bank forecasts that regional growth will accelerate to an average 4.4% over the next two years, with 30 of 47 economies in the region recording improved outlooks.
Andrew Dabalen, the World Bank’s Chief Economist for Africa, told a briefing that regional inflation has eased significantly.
“The median inflation is less than 4%. Moreover, most of the currencies which were cratering relative to the U.S. dollar have now recovered and are stable,” he said.
A weaker U.S. dollar down nearly 10% since the start of the year has also contributed to a more supportive environment for emerging markets.
Growth Outlook for Major Economies Upgraded
The World Bank raised its growth projections for Ethiopia, Nigeria, and Côte d’Ivoire, three of the region’s largest economies, citing stronger real income growth this year and next.
“While this marks a gradual recovery from a decade of successive shocks, the rebound has yet to gain strong momentum,” the report cautioned.
However, the Bank warned that challenges such as rising debt levels, trade uncertainty linked to the policies of U.S. President Donald Trump, and the looming expiry of the African Growth and Opportunity Act (AGOA) could undermine the region’s economic progress.
“Trade challenges remain very high,” Dabalen said. “We don’t know how this is going to be resolved because there are lots of negotiations going on.”
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The report emphasised that job creation remains the region’s most urgent challenge, calling on governments to foster small and medium-sized enterprises by improving the business environment.
“These jobs have to be jobs that provide a living wage and secure lives,” Dabalen said, noting that about 75% of new jobs in the region are in the informal sector.
Youth-led protests in Kenya, Nigeria, and Madagascar over unemployment and governance issues, he added, underscore the potential consequences of inaction.
“The consequences of not solving these problems are hard to contemplate. They will be very disruptive, and I think we’re beginning to see the signs of it,” Dabalen warned.
The report concludes that while Sub-Saharan Africa’s economic outlook is improving, sustained reforms and inclusive growth will be key to maintaining momentum in the face of global and domestic uncertainties.
