AfDB Reports Downside Risks to African Economic Growth

The African Development Bank (AfDB) reported on Monday that risks to the economic growth outlook for Africa were already skewed to the downside prior to the onset of the conflict in Iran. Regional instability and global economic pressures have created a challenging environment for the continent, according to a half-yearly report based on data collected through January. The institution projected that the pace of economic expansion across Africa would accelerate to 4.3% this year and reach 4.5% by 2027. This follows real gross domestic product growth of 3.5% in 2024 and 4.2% in 2025. However, the AfDB cautioned that these forecasts are threatened by mounting debt and significant fiscal pressures. > High debt-service costs continue to erode fiscal space and limit public investment, undermining long-term development. The current growth projections did not account for the recent escalation in the Middle East, which has driven energy prices higher and prompted some investors to withdraw capital from emerging markets. The AfDB noted that debt-service obligations are currently consuming more than 31% of government revenues across the continent, which effectively crowds out essential spending on infrastructure, education, and health. Total African public debt reached $1.9 trillion in 2024. The report highlighted that seven nations are currently in debt distress, while another 13 are considered at high risk. These financial burdens are compounded by a sharp decline in official development assistance (ODA), which many countries rely on to fund social protection programs. The United States, which historically provided a significant portion of bilateral aid to the region, largely eliminated its primary aid agency last year. Between 2015 and 2023, the U.S. had accounted for 33.6% of bilateral ODA to the continent. > The reduction in aid flows exposes Africa's health development financing landscape to acute shortfalls. Furthermore, foreign direct investment (FDI) flows were already 42% lower in the first half of 2025. The AfDB warned that increased risk aversion among global investors could lead to further capital outflows and currency volatility. > A flight to safety would trigger an appreciation of the U.S. dollar, with additional adverse effects on funding and the depreciation of domestic currencies for many African countries.