Rising Debt, War Fallout Push Africa Growth Forecast Down To 4.1%

The World Bank has lowered its growth forecast for Sub-Saharan Africa in 2026 to 4.1 per cent, citing the economic fallout from the ongoing Middle East conflict, rising debt burdens, and increasing external uncertainties as key risks to the region’s recovery.

In its latest report released on Wednesday, the lender revised its projection downward from the 4.4 per cent forecast made in October, noting that growth in 2026 is now expected to remain flat compared to 2025.

The downgrade reflects mounting pressures from higher fuel and fertilizer costs following the outbreak of the Iran war in late February, as well as weakening investment flows and constrained fiscal capacity across many African economies.

The report comes amid a fragile geopolitical backdrop, even as Washington and Tehran recently agreed to a temporary two-week ceasefire. However, the U.S. Energy Information Administration has warned that global fuel prices could continue to rise for months, particularly given uncertainties surrounding the Strait of Hormuz, a critical transit route for roughly one-fifth of global oil shipments.

According to World Bank chief economist for Africa, Andrew Dabalen, the downward revision underscores a far more challenging external environment than policymakers had anticipated at the end of last year. He noted that the ongoing conflict has already triggered sharp increases in energy and fertilizer prices, with the duration and scale of disruptions still unclear.

Beyond commodity price shocks, the World Bank highlighted growing uncertainty around investment flows from Gulf countries, which have become increasingly significant financiers of African economies, particularly in East Africa. These investments span key sectors such as mining, renewable energy, real estate, and information and communications technology.

Remittance inflows, another critical support for many African households, could also face headwinds if the conflict dampens labour demand in the Middle East, where millions of African migrants are employed. A prolonged downturn in these flows would further strain consumption and economic stability in several countries.

The impact of these external shocks is being exacerbated by limited fiscal space across the continent. Debt-servicing costs have nearly doubled over the past decade, rising from about 9 per cent of government revenues in 2017 to approximately 18 per cent in 2025.

As a result, nearly half of Sub-Saharan African countries are now either at high risk of debt distress or already experiencing it, leaving governments with little capacity to respond effectively to new economic shocks.

Regional data indicate that the burden is particularly acute in oil-importing and financially vulnerable economies in East and Southern Africa, including Burundi, Malawi, Ethiopia, Kenya, and Mozambique. In some scenarios, Kenya could face significant inflationary pressures, while Ethiopia remains exposed due to its large number of workers in the Middle East, particularly in Saudi Arabia.

While the outlook for West Africa remains less certain, Dabalen cautioned that incomplete fertilizer data for the sub-region means risks could still emerge as more information becomes available. He emphasized that the absence of immediate data should not be interpreted as insulation from the broader economic pressures affecting the continent.

Overall, the World Bank’s latest assessment highlights the growing vulnerability of Sub-Saharan Africa to global shocks, as geopolitical tensions, rising costs, and structural debt challenges continue to weigh on the region’s economic recovery prospects.