Middle East Conflict Set to Dampen African Economic Growth

The African Development Bank (AfDB) has issued a cautious outlook for the continent’s economy, citing the ongoing war in the Middle East as a significant headwind. The latest African Economic Outlook report projects real GDP per capita growth will decelerate from 2.1% in 2025 to 1.9% this year, before recovering to 2.2% in 2027.

These figures fall short of the 3.5% growth rate economists say is needed for meaningful inclusive development across Africa. The impact varies regionally: Central Africa is expected to buck the trend with stronger growth (3.8%) thanks to higher commodity prices, particularly oil. East and South Africa face more significant challenges due to supply chain disruptions, rising energy costs, and heightened food insecurity.

The war’s effects extend beyond direct trade links; the closure of key shipping lanes like the Strait of Hormuz is disrupting global supply chains and pushing up import costs across the continent. The AfDB notes that 27 African currencies have already depreciated against the dollar, exacerbating inflationary pressures.

Inflation Concerns Mount

The spike in oil prices has triggered broader inflationary concerns, with the average inflation rate projected at 10.4% for 2026 – up from earlier estimates. This poses a particular challenge for net-oil importing countries where fiscal deficits could widen, limiting their ability to support vulnerable populations.

Policy Recommendations

The AfDB recommends proactive policy responses:

• Central banks should maintain prudent monetary policies to manage inflation expectations
• Governments should implement targeted social safety nets rather than broad subsidies
• Temporary measures can help cushion the impact on low-income households and small businesses