AFRICA’S economy is projected to expand by 3.9 percent in 2025, rising further to 4 percent in 2026, despite mounting global uncertainties, inflationary pressures, and trade disruptions, according to the African Development Bank Group (AfDB) in its 2025 African Economic Outlook (AEO) released Tuesday.
Unveiled during the Bank’s Annual Meetings in Abidjan, Côte d’Ivoire, the flagship report, titled Making Africa’s Capital Work Better for Africa’s Development, showcases the continent’s ability to withstand external and domestic shocks while identifying vast, untapped potential in natural, human, and financial resources.
Growth outpaces global trends
The report outlines an encouraging trajectory, with 21 African countries set to achieve growth above 5 percent next year. Of these, Ethiopia, Niger, Rwanda, and Senegal are projected to reach the 7 percent threshold—a level considered critical for poverty reduction and inclusive development.
Africa’s growth, according to the AfDB, is expected to surpass global averages and outperform all regions except for emerging and developing Asia. This resilience is credited to domestic reforms, improved macroeconomic management, and ongoing digital and industrial transformation across various sectors.
Regional disparities persist
The economic outlook is not uniform across the continent:
- East Africa is forecast to lead, with growth averaging 5.9 percent in 2025–2026, powered by Ethiopia, Rwanda, and Tanzania.
- West Africa will grow at 4.3 percent, buoyed by new oil and gas production in Senegal and Niger.
- North Africa is set to grow by 3.6 percent, while Central Africa sees a slight decline to 3.2 percent.
- Southern Africa, home to the continent’s most industrialised economy, will lag with just 2.2 percent growth. South Africa is forecast to post only 0.8 percent, hampered by structural bottlenecks and weak investment.
Still, challenges remain widespread: 15 countries are grappling with double-digit inflation, and interest payments now consume 27.5 percent of total government revenue, up from 19 percent in 2019.
Untapped capital holds the key
The AfDB estimates that Africa could raise an additional $1.43tn in domestic resources simply through efficiency gains in tax and non-tax revenue mobilisation. The report spotlights four underutilised capital areas:
- Natural capital: Africa holds 30 percent of global mineral reserves. With proper policies, it could claim over 10 percent of the projected $16tn in green mineral revenues by 2030.
- Human capital: With a median age of 19, Africa could unlock $47bn in GDP through greater labour force participation.
- Financial capital: Pension assets now exceed $1.1tn, and remittances could reach $500bn by 2035 if transfer costs fall.
- Business capital: Full implementation of the AfCFTA could boost exports by $560bn and lift continental income by $450bn by 2035.
Capital outflows undermine progress
However, the report warns of massive leakages. In 2022, Africa received $190.7bn in financial inflows, but lost $587bn to capital flight. This includes:
- $90bn in illicit financial flows
- $275bn through profit shifting by multinationals
- $148bn lost to corruption and mismanagement
‘When Africa allocates its own capital—human, natural, fiscal, business and financial—effectively, global capital will follow,’ said Prof. Kevin Chika Urama, AfDB Vice President and Chief Economist, during the report’s presentation.
Urgent reforms and governance key
The AEO calls for bold reforms to reverse these losses and scale domestic mobilisation. Recommendations include:
- Digitising tax administration and broadening tax bases
- Enforcing value-addition policies for natural resource exports
- Making natural capital accounting mandatory
- Tapping institutional savings and developing local bond markets
- Harmonising financial regulations to enable cross-border investment
‘There is no substitute for sound macroeconomic management, quality institutions, good governance, and the rule of law,’ Prof. Urama added.
As Africa aims for inclusive and sustainable growth, the 2025 Outlook serves as both a progress report and a strategic blueprint — urging African nations to look inward, mobilise their capital, and drive their development agenda on their own terms.
