AfDB says Africa's growth risks were tilted to downside even before Iran conflict

The shock of the Middle Eastern conflict to the African economy could be modest, ‌the African Development Bank said on Monday, although it worsens an outlook already weakened by debt burdens, shrinking aid and global instability.

Chief Economist Kevin Urama estimated that growth could fall by about 0.2 percentage points provided the war does not last longer than three months.

“If the war continues for up to six months, we might see about a 1.5% decline,” he said further as the conflict ⁠worsens the impact of low foreign direct investments and reduced official development assistance and financial flows into Africa.

In the report, compiled with data up to January, the continent’s largest multilateral development finance institution projected that the pace of Africa’s economic growth would quicken to 4.3% this year, and 4.5% in 2027, but said mounting debt and fiscal pressures were significant headwinds.

OIL PRODUCING NATIONS COULD BENEFIT

The negative impact could be offset for oil-exporting African countries by higher oil prices that have resulted from supply disruption. International oil prices on Monday were on track for a record monthly gain as a result of the Iran war.

In theory, domestic refinery ‌capacity, such ⁠as Nigeria’s Dangote oil refinery could also cushion the continent against supply disruptions.

However, Urama said the crisis was already affecting African economies through higher fuel, food, and fertiliser prices.

About 29 African countries had already experienced currency depreciation linked to inflationary pressures from the shock, he said.

In its report, the AfDB said that continent-wide, debt-service obligations were consuming more than ⁠31% of government revenues, crowding out investments in health, education, and infrastructure.

Total African public debt reached $1.9 trillion in 2024, with seven countries in debt distress and 13 others at high risk.

The bank said that sharp cuts to official development assistance ⁠threatened health, education, and social protection programmes, noting that in some countries, external funding had covered more than half of current health expenditures.

The United States, which largely eliminated its primary aid agency last year, ⁠had accounted for 33.6% of bilateral ODA to Africa between 2015 and 2023.

The bank said that foreign direct investment flows to Africa were already 42% lower in the first half of 2025, and further risk aversion could trigger capital outflows.

REUTERS