Africa faces growth risks from global tensions – Afrieximbank

Africa’s economic growth could be reduced by up to 0.2 percentage points in 2026 due to the ongoing conflict in the Middle East, driven by higher energy costs, trade disruptions, and tighter financial conditions, Afreximbank has said.

The warning was contained in a statement obtained on Friday, in which the bank said African economies remain vulnerable to external shocks despite ongoing recovery efforts from previous global crises, including the COVID-19 pandemic and the Russia–Ukraine war.

The assessment was presented in Washington, DC, on Tuesday on the sidelines of the Spring Meetings of the International Monetary Fund and World Bank by the African Union Commission, the African Development Bank, the United Nations Economic Commission for Africa, and the United Nations Development Programme.

The report, titled Impacts of the Conflict in the Middle East on African Economies, warns that African economies remain exposed to external shocks, particularly through energy imports and global supply chains, at a time when they are still navigating the aftermath of the COVID-19 pandemic, the Russia–Ukraine war, and tightening global trade conditions.

“The closure of the Strait of Hormuz has significant consequences for transport and trade,” AfDB Chief Economist and Vice President for Economic Governance and Knowledge Management, Kevin Urama, who presented the findings, said.

The report estimates that the main transmission channels of the shock include rising prices of hydrocarbons, food, and fertilisers, alongside disruptions to logistics networks and heightened volatility in foreign exchange and capital markets.

It noted that around 80 per cent of Africa’s imported oil originates from the Middle East, while about 50 per cent of refined petroleum products also come from the region, according to Claver Gatete, Executive Secretary of the ECA. He added that 31 African countries are already experiencing currency depreciation linked to external pressures.

While projecting a modest drag on growth, the report cautioned governments against abrupt or reactive policy decisions. AfDB’s Urama urged policymakers not to respond with panic measures that could undermine fiscal stability, stressing the need for calibrated responses to emerging risks.

The report recommended targeted inflation management to anchor short-term price expectations, prudent handling of any windfall revenues in oil-exporting economies, and strengthened debt monitoring frameworks.

It also advised governments to deploy temporary and targeted social protection measures where fiscal space allows, while avoiding broad-based subsidies that could widen fiscal deficits over time.

To improve resilience, the report called for accelerated diversification of energy and food import sources, stronger intra-African trade in oil and fertiliser markets, and better coordination of fiscal and monetary policy across institutions.

It further urged faster implementation of the African Continental Free Trade Area and greater mobilisation of domestic capital through reforms such as the proposed New African Financial Architecture for Development, following recent continent-wide consultations that produced the “Abidjan Consensus” in April.

The report also called on development partners and multilateral lenders to step up emergency support and technical assistance to affected countries.

UN Deputy Secretary-General Amina J. Mohammed stressed the need to protect progress on global development targets, including the Sustainable Development Goals and Agenda 2063, despite rising external shocks.

“There is a need for global coordination, as no country or institution can face these shocks alone,” AfDB Senior Vice President Marie-Laure Akin-Olugbadé said, adding that rapid, people-centred responses were essential in times of crisis.

UNDP’s Ahunna Eziakonwa said African economies must use the disruption as a catalyst for energy independence and domestic innovation, particularly in technology and artificial intelligence.

The report noted that while the shock from the Middle East conflict is manageable in scale, it adds further pressure to an already fragile recovery path for African economies.