Africa’s growth outlook was already under pressure from mounting debt, shrinking aid flows and weakening foreign investment before the latest conflict involving Iran added fresh uncertainty to the continent’s economic prospects, the African Development Bank said Monday.
In a warning that underscored the fragility of Africa’s post-pandemic recovery, the bank said the direct impact of the Middle East conflict on African economies could be limited if the fighting is short-lived, but cautioned that a prolonged crisis would deepen existing vulnerabilities across the continent.
Chief Economist Kevin Urama said Africa’s growth could slow by about 0.2 percentage points if the conflict lasts no more than three months. But if the war drags on for as long as six months, the hit to growth could widen to around 1.5 per cent, he said.
The AfDB’s latest assessment, based on data compiled up to January, projected that Africa’s economic growth would accelerate to 4.3 per cent in 2026 and 4.5 per cent in 2027. Yet even before the latest geopolitical shock, the bank said the balance of risks was already tilted firmly to the downside.
That darker outlook reflects a convergence of pressures confronting many African governments: high borrowing costs, large debt-service obligations, reduced access to concessional financing, and a pullback in development assistance from major bilateral donors.
Across the continent, debt-service payments are now consuming more than 31 per cent of government revenues, the bank said, squeezing already stretched budgets and limiting spending on health, education and infrastructure. Public debt in Africa reached US$1.9 trillion in 2024, with seven countries already in debt distress and 13 more at high risk, according to the report.
The AfDB also warned that falling official development assistance was creating additional strain, especially for poorer and more fragile states that remain heavily dependent on donor support to finance basic social services. In some African countries, external assistance has accounted for more than half of current health expenditure, the bank said.
The United States — long one of the continent’s biggest bilateral donors — accounted for 33.6 per cent of bilateral official development assistance to Africa between 2015 and 2023, the report noted, meaning any sharp reduction in American support could have significant ripple effects.
At the same time, foreign direct investment has also weakened sharply. The AfDB said FDI flows to Africa were already 42 per cent lower in the first half of 2025, a trend that could worsen if investors become more risk-averse amid rising geopolitical tensions and volatility in global financial markets.
The conflict in the Middle East is already feeding through to African economies in the form of higher fuel, food and fertiliser prices, Urama said. Those price pressures have in turn worsened inflation and put renewed pressure on currencies across the continent. According to the bank, about 29 African countries had already experienced currency depreciation linked to the latest shock.
Still, the fallout may not be evenly negative. Oil-exporting countries in Africa could benefit from higher crude prices if global supply disruptions persist, potentially boosting export earnings and public revenues for some producers.
In theory, expanded refining capacity on the continent — including projects such as Nigeria’s Dangote refinery — could also help cushion some African economies against disruptions in global fuel supply chains, though the wider inflationary effects of higher energy costs would remain difficult to avoid.
For the AfDB, the latest conflict is less a standalone threat than a force multiplier for structural weaknesses that were already undermining Africa’s recovery. While the continent is still expected to outpace some other regions in growth, the bank made clear that without stronger fiscal buffers, more investment and a more stable global environment, that recovery will remain vulnerable to shocks from abroad.
