Africa at a Turning Point: Growth Momentum in a Fragmented Global Economy

The African economy stands at a pivotal juncture, according to the UNCTAD Trade and Development Report 2025. While the continent continues to display a measure of resilience and growth momentum, it remains highly exposed to global geoeconomic shocks and persistent financial constraints. Africa’s contribution to global economic growth is estimated to have increased to approximately 4.6 per cent in 2025, up from 3.6 per cent in 2024, with projections suggesting a further rise to 5.2 per cent by 2026. Despite this positive trajectory, Africa’s contribution remains among the lowest of all world regions, exceeding only that of Oceania. In terms of real GDP growth, the continent is projected to expand by about 3.7 per cent in 2025, rising modestly to 4.1 per cent in 2026. At that level, Africa would marginally outperform Asia, where growth is forecast at around 3.9 per cent in the same year.

The report also identifies a significant reconfiguration of global trade patterns. Global merchandise exports are increasingly being redirected toward ASEAN countries, Africa, and Central Asia, alongside a reported 9.9 per cent decline in goods exports to the United States during the first half of 2025, particularly from China. This trend suggests that recent shifts in United States trade policy are beginning to reshape global trade flows, encouraging exporters to diversify markets and reduce reliance on the U.S. market. For Africa, this realignment presents both opportunities and risks. While it may create new export opportunities and strengthen South–South trade linkages, the extent to which African economies can benefit will depend critically on their ability to expand productive capacity, improve trade facilitation, and secure adequate access to trade finance. In this respect, access to trade finance remains a particularly acute point of concern: the report highlights a persistent trade finance gap in Africa, with unmet demand estimated at approximately USD 120 billion, which continues to constrain firms’ participation—especially that of small and medium-sized enterprises—in regional and global trade.

Despite these growth dynamics, UNCTAD cautions that current rates remain insufficient to close Africa’s substantial development gaps or deliver meaningful poverty reduction, especially in the context of rapid population growth. These challenges are further compounded by declining official development assistance and uncertainty surrounding the potential expiration of the African Growth and Opportunity Act (AGOA), developments that could adversely affect export performance and investment prospects.

Major Trends and Structural Shifts:

• Financial Asymmetry and Debt Distress: Africa remains trapped in a reinforcing cycle of debt vulnerability and climate exposure. Although the continent accounts for only about 2 per cent of global public debt, African countries face borrowing costs two to four times higher than those of advanced economies such as the United States. By 2024, nearly half of African countries recorded debt-to-GDP ratios exceeding 60 per cent, with rising interest payments forcing governments to cut critical expenditures on basic public services such as health, education, and infrastructure.
• Trade Reorientation toward the Global South: Trade patterns are gradually shifting as Africa deepens economic ties with the Global South. While exports to traditional Western markets have been volatile, South–South trade—particularly with China and within the ASEAN region—continues to expand, reflecting broader changes in global demand and supply chains.

Africa’s growth prospects remain constrained by several interlinked challenges. Climate-related economic vulnerability continues to impose significant costs, with projected losses expected to rise sharply in the absence of substantial adaptation investment. At the same time, prolonged geopolitical and trade policy uncertainty—especially regarding tariff regimes in major economies such as the United States and China—has encouraged a “wait-and-see” approach among firms. This has led to the postponement of critical structural investments necessary for industrialization, export diversification, and long-term growth.

To reduce dependence on external financing, the report calls for a paradigm shift toward enhanced domestic resource mobilization. Key priorities include curbing resource leakages, deepening regional capital markets, and improving fiscal efficiency. However, while the report briefly acknowledges the pervasive informality of African economies, this issue would have benefited from a far more comprehensive and systematic assessment. The formalization of the informal economy represents a structural challenge but also a largely underexploited opportunity to expand the tax base, raise productivity, and sustain higher GDP growth in the continent. A deeper engagement with this dimension would have strengthened UNCTAD’s analysis, as progress in formalization could significantly augment domestic resources and help close Africa’s persistent financing gap.