Africa’s economic trajectory is set to improve significantly, with the continent’s GDP projected to grow by 4.2% in 2025, according to a new report by the Washington-based Brookings Institution. This forecast marks a recovery from the 3.1% growth recorded in 2023, as cited by the African Development Bank, highlighting Africa’s resilience amid global economic uncertainties.
Key to this recovery are the structural reforms and infrastructure investments being implemented across several African countries, including Nigeria. These efforts, coupled with the flourishing impact of the African Continental Free Trade Area (AfCFTA), are expected to strengthen regional integration and drive intra-African trade. The report also emphasizes the role of Africa’s rapidly urbanizing population and dynamic youth demographic in fueling domestic demand and economic growth.
Despite this promising outlook, Brookings warns of significant challenges. The report underscores the persistent burden of external debt, with Africa’s debt-to-GDP ratio rising from 57 per cent in 2019 to 67 per cent in 2022. “Africa’s economies are highly vulnerable to external shocks, such as fluctuations in commodity prices, global recessions, and changes in trade and economic policies by major economies like the U.S. and China. Africa’s net external debt, while low by global standards, increased by 24 per cent to 57 per cent of GDP by 2019. Debt-servicing costs doubled, and current account balances halved. Just three years later, in 2022, the region’s average debt-to-GDP ratio stood at 67 per cent. Debt servicing has continued to hamstring governments in 2024, when it accounted for 13.6 per cent of government expenditure across Africa.”
Brookings also highlights the need for economic diversification, noting that Africa’s transition from agriculture and extraction to service-led economies has begun to yield results. The service sector now accounts for 56 per cent of the continent’s economic output, up from 50 per cent in the 2000s, reflecting a decade of robust growth.
Technological based Economy
Africa’s technological revolution presents another bright spot. The continent’s tech startup ecosystem has tripled in size within two years, with countries like Nigeria, Kenya, and South Africa emerging as innovation hubs. With internet usage growing at an annual rate of 17 per cent since 2013, and fintech and e-commerce sectors expanding rapidly, Brookings argues that Africa could lead the global digital economy among developing markets.
In conclusion, the report stresses the importance of harnessing Africa’s strategic assets while addressing vulnerabilities. “To realise its full economic potential, Africa must harness its diversity, leverage its strategic assets, and mitigate emerging challenges that come with globalisation. Indeed, the continent is already in transition; for example, Africa’s economies are shifting rapidly from agriculture and extraction to services.
“Reflecting that shift, employment in services increased from 30 per cent to 39 per cent. Services also secured its place as the major driver of the continent’s economic output, growing to 56 per cent in the last decade compared with 50 per cent in the 2000s as it captured shares from the extractive industries,” it stated.
Brookings’ projections align with forecasts from Moody’s and the World Bank, which also predict a 4.2 per cent growth rate for sub-Saharan Africa in 2025. However, all institutions caution that external factors, such as high borrowing costs and a strong US dollar, may temper the region’s growth momentum.
