World Bank projects 4.2% Growth for Sub-Saharan Africa in 2025

World Bank

The World Bank in its January 2025 global prospects report, has forecasted an average growth rate of 4.2% for Sub-Saharan Africa’s economy in 2025-26, propelled by industrial commodity exporting countries and the region’s largest economies. However, despite this positive outlook, Nigeria and South Africa, the two largest economies in the region, continue to lag with sluggish growth rates. “The pace of recovery in Sub-Saharan Africa will hinge on the region’s ability to balance fiscal consolidation with growth-stimulating investments,” remarked Ayhan Kose, Director of the Prospects Group at the World Bank.

Non Resource Rich Economies

These economies are expected to accelerate growth by 6.3% over the same period, buoyed by a surge in private investment, an improved business environment, and enhanced export competitiveness. “Countries that diversify their economic base away from commodity dependence show more resilience and higher growth potential,” the World Bank report notes.

Country-Specific Trends

For Tanzania, growth is expected to be robust, supported by significant public investments. For Kenya, their economy will benefit from private investment and favorable monetary policies. Ugandan growth here is expected to be driven by increased investment and private consumption. “East African economies, led by Uganda and Kenya, continue to set an example of integrating policy reforms with growth-oriented strategies,” the report emphasizes.

Drivers of Growth

Easing Financial Conditions: With declining inflation and potential adjustments in monetary policy, there’s an expectation for increased private consumption and investment. “Monetary easing is critical for unlocking consumer spending and improving liquidity in key sectors,” the report comments.

Growth in industrial-commodity exporters, excluding Sudan, is set to recover thanks to a revival in the services sector and household spending. “Service sector expansion is pivotal for transforming Sub-Saharan Africa’s economic landscape,” the report notes.

Infrastructure developments, particularly in oil-exporting countries like Nigeria, are key growth contributors. “Targeted public investment in infrastructure can have multiplier effects, boosting connectivity and productivity,” according to the World Bank.

Social and Economic Inequalities

The projected annual per capita income growth of 1.7% for 2025-26 is seen as inadequate for significant poverty alleviation, with about 30% of Sub-Saharan African economies not expected to reach pre-pandemic income levels by 2026. “Persistent income inequality undermines long-term development goals,” the report warns.

While inflation is moderating in most parts, countries like Angola, Ethiopia, and Nigeria still contend with high price pressures due to substantial currency depreciation. “Containing inflation requires not just monetary tools but fiscal discipline and supply chain efficiency,” the report suggests.

Regional Highlights

Western and Central Africa growth is projected at 4.2% to 4.3%, with enhancements in fiscal balance due to higher revenue. Eastern and Southern Africa, anticipated recovery supported by lower inflation and increased investments. “Region-specific strategies are essential for addressing Sub-Saharan Africa’s diverse challenges and opportunities,” the report emphasizes.

Nigeria’s Growth Projections

According to the World Bank’s Global Economic Prospects report for January 2025, Nigeria’s GDP growth is anticipated to rise to an average of 3.6% annually between 2025-26, up from an estimated 3.3% in 2024. This uptick is largely due to a series of macroeconomic and fiscal reforms that have begun to enhance business confidence.

The backbone of Nigeria’s economic growth, the services sector, particularly financial and telecommunications services, continues to lead the charge in economic advancement. Although oil production is set to increase, it will not reach the full OPEC quota, thus limiting its role in boosting overall economic growth. This sector remains sensitive to global oil price fluctuations and OPEC decisions. With inflation on a downward trend, thanks to monetary policy tightening in 2024, private consumption is expected to strengthen, providing further strength to economic activity.

While Nigeria shows signs of economic recovery and growth, the path forward requires careful management of fiscal policies, continued diversification efforts, and strategic responses to global economic dynamics to ensure sustained progress and address underlying structural issues. The persistent weakness of the naira continues to exert inflationary pressure, impacting household purchasing power and overall economic stability.

Risks and Challenges

High government debt and rising interest rates are limiting fiscal maneuverability across Sub-Saharan Africa, even as countries pursue fiscal consolidation. “For many Sub-Saharan African countries, debt service obligations now exceed their education and health spending combined,” the report warns.

Also, with increasing frequency, adverse weather events like floods and droughts are causing substantial economic disruptions, especially in agriculture-reliant nations. “Climate change has become an economic crisis multiplier, disproportionately affecting the most vulnerable populations,” the report underscores.

Over 160 million people in Sub-Saharan Africa are grappling with food crises, primarily due to climate impacts and ongoing conflicts, with Sudan and South Sudan facing the most severe conditions. “Food insecurity is not just a humanitarian concern; it is a direct barrier to economic development,” highlights the report.

A slowdown in China, a major trading partner, could significantly impact commodity demand and investment flows, given Sub-Saharan Africa’s heavy reliance on commodity exports. “The global trade slowdown disproportionately impacts Sub-Saharan Africa, as its economies are deeply tied to commodity exports,” stated Indermit Gill, Chief Economist at the World Bank.

Policy Recommendations

The need for macroeconomic reforms, better governance, and human capital investments to boost productivity and resilience is highlighted. “Governance reforms, when combined with investments in education and health, have the potential to yield transformational growth,”

Prioritizing strategies to lessen climate impacts and tackle food insecurity. “Climate-resilient agriculture and disaster preparedness should be at the forefront of policy agendas,” the report highlights.

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Enhancing intra-regional trade and forging investment partnerships for sustainable development. “Sub-Saharan Africa must deepen intra-regional trade to reduce reliance on external markets,” the report suggests.

The World Bank not only outlines the projected growth for Sub-Saharan Africa but also underscores the multifaceted challenges and strategic imperatives for harnessing this potential for sustainable development.

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