Macroeconomic Performance and Growth Dynamics

Regional economic growth across Sub-Saharan Africa has exceeded earlier projections, with the World Bank revising its 2025 forecast upward from 3.5% to 3.8%^[1]. This acceleration continues into 2026, with average growth expected to reach 4.4% over the 2025-2026 period^[1]. Growth projections have been upgraded for 30 of the region's 47 economies, with Ethiopia seeing a significant 0.7 percentage point increase, Nigeria up 0.6 points, and Côte d'Ivoire gaining 0.5 points^[1]. These revisions reflect improved terms of trade and strengthening commodity positions that have supported economic expansion despite ongoing global uncertainties.

East Africa demonstrates particularly robust performance, with average real GDP growth projected at 8% through 2029^[5]. Ethiopia's economy is forecast to expand 7.2% in 2025, substantially outpacing the Sub-Saharan average of 3.7%^[5]. Key growth drivers include Ethiopian Airlines' fleet expansion, increased agricultural output, and the addition of at least 2,500 megawatts to the country's power grid^[5]. Tanzania maintains solid momentum with 6% projected growth in 2025, supported by tourism reaching 3 million arrivals and sustained infrastructure investments across services, industry, and construction sectors^[5].

Inflation Trends and Monetary Conditions

Inflation across Sub-Saharan Africa has declined dramatically from its 9.3% peak in 2022 to 4.5% in 2024, with expectations of maintaining between 3.9% and 4% annually during 2025-2026^[1]. The number of countries achieving single-digit inflation has increased from 27 in 2022 to 37 in 2025-2026, representing substantial progress in price stability^[1]. Approximately 60% of regional economies experienced slower inflation in 2025, creating room for monetary policy easing and supporting household purchasing power^[1].

Falling commodity prices have contributed significantly to inflation moderation. The World Bank's food price index dropped 4% year-on-year by August 2025, while Brent crude oil prices declined 16%^[1]. However, nine economies including Angola, Ethiopia, Ghana, Malawi, Nigeria, São Tomé and Príncipe, Sudan, Zambia, and Zimbabwe continue experiencing double-digit inflation, presenting ongoing monetary challenges^[1]. Tanzania's inflation is projected at 3.3% in March 2025, marginally higher than 2024's 3.1%^[5].

Currency Markets and Exchange Rate Stability

Major African currencies have demonstrated remarkable resilience and appreciation against major global currencies throughout 2025. Ghana's cedi strengthened 20% against the US dollar during the first eight months of 2025, while Zambia's kwacha gained 16% since year-start^[1]. These currency movements reflect looser financial conditions and improved investor confidence, directly contributing to lower domestic fuel and food prices across multiple countries^[1]. Exchange rate stability has enhanced purchasing power and created favorable conditions for continued monetary policy easing, supporting both consumption and investment activities.

Foreign Direct Investment Landscape

Foreign investment patterns across Africa continue evolving beyond traditional extractive industries toward diversified, forward-looking sectors^[2]. The investment profile increasingly mirrors global trends, with rising shares in services and manufacturing representing a structural shift in capital allocation^[2]. In 2023, six of the ten largest greenfield investments announced in the developing world were located in Africa, matching Asia's performance and signaling growing competitiveness for large-scale projects^[2].

Renewable Energy Investments

Multi-billion-dollar green hydrogen ventures have emerged as major FDI drivers, including a landmark project in Mauritania valued at several multiples of the country's GDP and large-scale green ammonia and hydrogen facilities in Egypt's Suez Economic Zone^[2]. Wind farms in Morocco, solar parks in South Africa and Egypt, and diverse clean energy infrastructure projects position Africa as a future green energy exporter aligned with global climate objectives^[2].

Technology and Digital Economy

Africa's digital sector has attracted the highest number of new investment projects in recent years, with global tech companies and venture capitalists targeting fintech, mobile telecommunications, e-commerce, and business process outsourcing^[2]. Software and IT services have become major FDI drivers, reflecting the continent's rapid technological adoption and digital transformation^[2].

Structural Challenges and Risk Factors

Despite positive growth momentum, the pace of expansion remains insufficient to meaningfully reduce poverty levels across the region^[1]. Many African economies remain trapped in cycles of low growth, high vulnerability, and limited fiscal space^[3]. Official Development Assistance (ODA), historically a vital financing pillar, is declining as donor countries shift priorities toward domestic needs, creating additional pressure on development financing^[3].

Climate-related disruptions pose significant downside risks to agricultural yields and economic stability^[5]. Tanzania faces potential weather-related challenges ahead of October 2025 elections, while multiple countries confront reduced commodity revenues amid tighter international financial conditions^[3]. Persistent global trade tensions and elevated borrowing costs compound these structural weaknesses, threatening to reverse gains in fiscal stability and macroeconomic resilience^[3].

Continental Integration and Policy Frameworks

The African Continental Free Trade Area (AfCFTA) continues reshaping the investment landscape by harmonizing rules and integrating 1.3 billion people into a unified market^[2]. The 2023 adoption of the Protocol on Investment promotes, facilitates, and protects cross-border investments across member states, reducing policy uncertainty and encouraging intra-African capital flows^[2]. As trade barriers diminish and regulations converge, foreign companies can more efficiently scale operations across multiple countries, accessing larger economies of scale and streamlined cross-border operations^[2].

Forward-Looking Perspective

The immediate outlook suggests continued growth acceleration through 2026, supported by monetary policy normalization, improving external balances, and diversifying investment flows. However, sustainability depends critically on maintaining fiscal discipline, attracting sufficient development financing, and managing climate-related vulnerabilities. The convergence of easing inflation, stable currencies, and expanding AfCFTA implementation creates a constructive environment for strategic investments, particularly in sectors aligned with global sustainability and digitalization trends. Investors should monitor upcoming electoral cycles, commodity price movements, and international financial conditions as key variables influencing near-term market dynamics across the continent.