Africa’s short-term outlook resilient despite global economic and political headwinds, says AfDB
With the right policies, Africa has the potential to mobilize an additional $1.43 trillion in domestic resources from both tax and non-tax revenue sources, and curbing leakages
KAMPALA, May 29, 2025 — Africa’s economy is projected to increase from 3.3 percent growth in 2024 to 3.9 percent in 2025, reaching 4 percent in 2026, despite mounting geopolitical uncertainties and trade tensions, the African Development Bank Group [AfDB] said Tuesday in its flagship 2025 African Economic Outlook report.
Despite the prevailing domestic and external challenges Africa continues to demonstrate notable resilience. The report, titled “Making Africa’s Capital Work Better for Africa’s Development,” was released during the Bank Group’s 2025 Annual Meetings, taking place in Abidjan, Côte d’Ivoire. It demonstrates the continent’s capacity to weather multiple shocks while identifying pathways to unlock a vast potential for transformation.
Strong growth outlook despite global headwinds
The report presents encouraging projections despite significant challenges:
- 21 African countries will achieve growth exceeding 5 percent in 2025, with four countries—Ethiopia, Niger, Rwanda, and Senegal—potentially reaching the critical 7 percent threshold required for poverty reduction and inclusive growth.
- Africa’s projected growth rates will surpass the global average and outpace most other regions except emerging and developing Asia.
- Africa’s continued resilience is built on effective domestic reforms and improved macroeconomic management.
Mixed growth performance across Africa’s regions
Growth prospects vary significantly across regions: East Africa leads with a projected 5.9 percent growth in 2025-2026, driven by resilience in Ethiopia, Rwanda, and Tanzania. West Africa maintains solid 4.3 percent growth, driven by new oil and gas production coming onstream in Senegal and Niger.
In the face of persistent headwinds, North Africa is expected to register 3.6 percent growth in 2025. In Central Africa, growth is projected to slow to 3.2 percent and Southern Africa will grow at only 2.2 percent, with its largest economy, South Africa, expected to achieve only 0.8 percent growth
Significant challenges persist. Fifteen countries are experiencing double-digit inflation, while interest payments now consume 27.5 percent of government revenue across Africa, up from 19 percent in 2019.
“Africa must now face the challenge and look inwards to mobilizing the resources needed to finance its own development in the years ahead,” said Prof. Kevin Chika Urama, Chief Economist and Vice President of the African Development Bank Group, presenting the report’s findings.
Massive domestic resource potential remains untapped
The AEO 2025 estimates that, with the right policies, Africa could mobilise an additional US$ 1.43 trillion in domestic resources from tax and non-tax revenue sources through efficiency gains alone. Africa’s extraordinary but underutilised resource base includes:
- Natural capital: Africa hosts 30 percent of global mineral reserves and could capture over 10 percent of the projected US $16 trillion in revenues from key green minerals by 2030
- Human capital: The continent’s median age of 19 represents a demographic dividend that could add US$ 47 billion to Africa’s GDP through improved workforce participation
- Financial capital: Pension fund assets have grown to US$ 1.1 trillion, while formal remittances could reach US$ 500 billion by 2035 if transfer costs are reduced
- Business capital: Full implementation of the African Continental Free Trade Area could increase exports by US$ 560 billion and boost continental income by US$ 450 billion by 2035
Urgent action needed to address resource leakages
The report stresses that massive capital outflows are undermining the continent’s development. Compared to US$ 190.7 billion of financial inflows received in 2022, Africa lost approximately US$ 587 billion from financial leakages. Of this, around US$ 90 billion was lost to illicit financial flows, a further US$ 275 billion siphoned away by multinational corporations shifting profits, and US$ 148 billion lost to corruption.
AfDB Vice President Urama said: “When Africa allocates its own capital [human, natural, fiscal, business and financial] effectively, global capital will follow Africa’s capital to accelerate investments in productive sectors in Africa.”
Key policy recommendations
“There can be no substitute to sound macroeconomic policy management, quality institutions and good governance, and rule of law.” Urama said, emphasising the vital need to bolster governance.
The report also calls for comprehensive reforms across several critical areas. On fiscal revenue mobilisation, it recommends enhancing tax administration through digitalisation, broadening national tax bases, and strengthening social contracts with citizens to improve compliance. It advocates making natural capital accounting mandatory and enforcing domestic value retention through beneficiation requirements.
The AEO also emphasises the need to deepen financial markets by tapping institutional savings, developing local currency bond markets, and harmonising regulatory frameworks to facilitate cross-border investment.
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