The African Development Bank (AfDB) said in its half-yearly economic report that the balance of risks to Africa’s growth was tilted to the downside even before the recent conflict in Iran. The report, compiled with data up to January, projects that the continent’s economic expansion will accelerate to 4.3% in 2026 and to 4.5% in 2027, but it highlights a range of fiscal and external vulnerabilities that could undercut that trajectory.
According to the AfDB, these growth projections represent an uptick from real gross domestic product growth of 3.5% in 2024 and 4.2% in 2025. However, the forecast explicitly excludes the potential effects of the Iran war, a development that has already lifted energy costs and prompted some investors to withdraw funds from emerging markets.
Central to the bank’s concern is the rising weight of debt-service obligations on government budgets. Continent-wide, the report finds that debt-service payments now consume more than 31% of government revenues. That pressure, the AfDB warns, is crowding out spending on critical public goods and limiting the ability of governments to invest in long-term development priorities.
Total African public debt reached $1.9 trillion in 2024, the report notes, and a number of countries are under acute stress: seven are classified as in debt distress and 13 more are at high risk of following suit. The bank stresses that high debt-service costs continue to erode fiscal space and limit public investment, a dynamic that undermines long-term development prospects.
The AfDB also flags a contraction in external support that is tightening social safety nets. Sharp cuts to official development assistance, the bank says, threaten health, education and social protection programmes. In some countries, external funding at present covers more than half of current health expenditures, leaving those systems vulnerable to reductions in aid.
The United States, the report states, had accounted for 33.6% of bilateral official development assistance to Africa between 2015 and 2023 and, the bank adds, the United States largely eliminated its primary aid agency last year. That shift in the aid landscape is highlighted as a factor exposing health development financing to acute shortfalls.
Foreign direct investment flows are another point of weakness. The AfDB reports that FDI to Africa was already 42% lower in the first half of 2025. The bank warns that further risk aversion could trigger capital outflows. A flight to safety, it says, would push the U.S. dollar higher and carry additional negative consequences for funding and for the exchange rates of many African currencies, potentially causing domestic currency depreciation.
Data and scope
The findings and projections in the report are based on information available through January and do not factor in subsequent developments related to the Iran conflict. The bank emphasises that while the headline growth numbers show a near-term pickup, the structural fiscal and external pressures it documents remain significant headwinds.