Sub-Saharan Africa is expected to grow by 4.2% in 2025, compared to an estimated 3.8% in 2024

Declining inflationary pressures and easing financial conditions are expected to gradually reduce financing costs in the region, but political and climate risks could weigh on the region’s economic outlook.

Sub-Saharan Africa is expected to grow by 4.2% in 2025, compared to an estimated 3.8% in 2024, credit rating agency Moody’s Ratings said in a report released on Wednesday, January 8, 2025.

Entitled “Sovereign – Sub-Saharan Africa: 2025 outlook stable as financing conditions improve; but debt costs still high”, the report states that the average economic growth in the region is expected to be higher than that recorded over the past decade, which was marked by several endogenous and exogenous shocks such as the fall in commodity prices during 2014-2016, the COVID-19 pandemic and the surge in inflation following the outbreak of the Russia-Ukraine conflict.

The projected increase in growth during the current year is expected to result in particular from the easing of financial conditions, increased investment in infrastructure and the energy sector, an acceleration in the pace of economic reforms and the expansion of the services sector.

Moody’s analysts note that the decline in inflation and the lower policy rates implemented by the world’s major central banks will support a general trend towards monetary policy easing in the region, which would allow a gradual reduction in financing costs. However, these costs are expected to remain higher than in the pre-COVID-19 period.

As such, financing constraints will persist for a number of governments, while high financing requirements for servicing external debt relative to usable foreign exchange reserves will be another source of sovereign risk. A sustained appreciation of the dollar in 2025 could also increase the cost of servicing foreign currency debt.

The US agency further noted that South Africa and Nigeria, the region’s two largest economies, will continue to implement economic reforms that will strengthen their creditworthiness and growth prospects.

“For South Africa, improvements will be gradual, despite a significant reduction in power outages and load shedding, while Nigeria is expected to continue its efforts to establish a more efficient foreign exchange market,” it stressed.

Economic growth in Angola and the Republic of Congo is also expected to strengthen in 2025, thanks in particular to the exploitation of new oil and gas projects that will compensate for the decline in production from aging fields.

Moody’s also expects foreign direct investment flows to remain strong towards countries producing raw materials needed for the energy transition, such as the Democratic Republic of Congo and Namibia.

However, climate risks will weigh on the economic outlook for some countries, such as the persistence of drought that has disrupted hydroelectric and mining production in Zambia, cancelling out the benefits of higher copper prices.

Political risks could also compromise stability in other countries, such as Côte d’Ivoire, which will hold elections in October 2025 in which President Alassane Ouattara could run for a controversial fourth term, and Mozambique, where the opposition continues to contest the victory of the ruling party candidate in the presidential election on October 9, 2024.