- Africa’s Gross Domestic Product is projected to grow by 4.2 per cent in 2025, according to Brookings Institution
- The projected growth is attributed to factors such as increased investments in infrastructure, ongoing economic reforms, and strong domestic demand
- The report highlighted rising external debt as a threat to the continent’s fiscal sustainability
Brookings Institution, a Washington-based think tank, says Africa’s Gross Domestic Product (GDP) will grow by 4.2 per cent in 2025.
According to the institute’s latest Foresight Africa report published on Tuesday, January 14, the projected growth is an improvement from the 3.1 per cent recorded in 2023 as reported by the African Development Bank (AfDB).
The projected GDP growth is attributed to factors such as increased investments in infrastructure and ongoing economic reforms in many countries, including Nigeria.
Brookings also said Africa would benefit from a strong domestic demand driven by rapid urbanisation and a growing young population.
The report also highlighted that the gradual implementation of the African Continental Free Trade Area (AfCFTA) would create new economic opportunities by promoting regional integration and boosting intra-African trade.
Growing debt threatens Africa’s growth outlook
The report noted that the rising external debt profile of many African economies poses a threat to the projected growth of the continent.
It highlighted that increasing debt servicing costs was a significant constraint to the continent's development, accounting for 13.6 per cent of African governments’ expenditure in 2024.
It said, “Africa’s economies are highly vulnerable to external shocks, such as fluctuations in commodity prices, global recessions, and changes in trade and economic policies by major economies like the U.S. and China.
“Africa’s net external debt, while low by global standards, increased by 24 per cent to 57 per cent of GDP by 2019. Debt-servicing costs doubled, and current account balances halved.
“Just three years later, in 2022, the region’s average debt-to-GDP ratio stood at 67 per cent. Debt servicing has continued to hamstring governments in 2024, when it accounted for 13.6 per cent of government expenditure across Africa.”
The report noted that to mitigate the risks arising from external debt, African countries need to build economic resilience through diversification and fostering domestic demand.
It also identified other headwinds threatening the continent including increased political instability with events like coups, and extreme weather conditions such as droughts and floods, which continue to disrupt agricultural production and threaten food security in several regions.
Increased technological revolution in Africa
The report highlighted the rapid technological revolution on the continent, occasioned by mobile device penetration, fintech, and e-commerce, which has led to an increase in internet users by 17 per cent annually since 2013.
It noted the potential of Africa to lead the digital economy in developing markets due to the technological innovation and revolution taking place on the continent.
The report read, “Africa’s tech startup scene, with the number of startups tripling in less than two years—particularly in countries like Nigeria, Kenya, and South Africa—is gaining global attention and investment.
“By fostering innovation ecosystems and ensuring regulatory frameworks that support technology adoption, Africa can lead the digital economy in developing markets.
“To realise its full economic potential, Africa must harness its diversity, leverage its strategic assets, and mitigate emerging challenges that come with globalisation. Indeed, the continent is already in transition; for example, Africa’s economies are shifting rapidly from agriculture and extraction to services.
“Reflecting that shift, employment in services increased from 30 per cent to 39 per cent. Services also secured its place as the major driver of the continent’s economic output, growing to 56 per cent in the last decade compared with 50 per cent in the 2000s as it captured shares from the extractive industries.”
40% of African countries face rising debt crisis – ECA
Meanwhile, TheRadatr earlier reported that the United Nations Economic Commission for Africa (ECA) raised alarm over increasing debts across Africa and said that 40 per cent of countries on the continent are either in debt distress or at high risk.
The commission said it is worried that most African nations in the crisis are appropriating more funds to debt interest payments than to critical sectors that could stimulate development.
