AfDB says Africa’s growth risks were tilted to downside even before Iran conflict

By Colleen Goko

JOHANNESBURG, March 30 – The risks to Africa’s economic growth outlook were skewed to the downside even before the Iran conflict began, the African Development Bank (AfDB) said in a ​half-yearly report on Monday, as regional instability and global pressures ‌cast a shadow over the continent.

In the report, compiled with data up to January, the continent’s largest multilateral development finance institution projected that the pace of Africa’s economic growth would quicken to 4.3% this year, and 4.5% in 2027, but warned ‌that ​mounting debt and fiscal pressures represent significant ⁠headwinds.

“High debt-service costs continue to ⁠erode fiscal space and limit public investment,” the report states, warning that this undermines long-term development.

The growth forecast, up from real gross domestic product growth of 3.5% in 2024 and 4.2% in 2025, ​did not incorporate the impact of the war in Iran, which has spiked energy prices higher and led some investors to pull money ⁠from emerging markets.

The AfDB said that continent-wide, ⁠debt-service obligations were consuming more than 31% of government ​revenues, crowding out investments in health, education, and infrastructure.

Total African public debt ​reached $1.9 trillion in 2024, with seven countries in debt distress ‌and 13 others at high risk.

SMALLER SAFETY NETS, FDI DROP

The bank said that sharp cuts to official development assistance threatened health, education, and social protection programmes, noting that in some countries, external funding had covered more ⁠than half of current health expenditures.

“The reduction in aid flows… exposes Africa’s health development financing landscape to acute shortfalls,” the report warned.

The United States, which ⁠largely eliminated its primary ‌aid agency last year, had accounted for 33.6% ⁠of bilateral ODA to Africa between 2015 and 2023.

The ​bank ‌said that foreign direct investment flows to Africa were ​already 42% ⁠lower in the first half of 2025, and further risk aversion could trigger capital outflows.

“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,” the report said.

(Reporting by Colleen Goko; Editing ​by Hugh Lawson)