AfDB trims the region’s outlook as global risks mount
Southern Africa growth is set to weaken this year, according to the African Development Bank, which projects the region’s economy slowing from 2.3 percent in 2025 to 2.1 percent in 2026. For South Africans, the headline number comes with a direct message: the bank expects the local economy to expand by just 1.2 percent this year, far too slow to make a real dent in unemployment. sabcnews
The projections appear in the bank’s 2026 Regional Economic Outlook for Southern Africa, titled Mobilising Southern Africa’s Development Financing at Scale in a Fragmented World, released on Tuesday 28 July, with the accompanying statement issued on 29 July. ZAWYA
The bank attributes the slowdown to structural constraints, including limited economic diversification, infrastructure deficits and low domestic resource mobilisation. It also warns that the Middle East conflict is likely to weigh on regional growth through higher oil prices, trade disruptions and tighter global financial conditions. sabcnewssabcnews
There is a brighter medium-term picture. Regional growth is projected to rebound to 2.7 percent in 2027, supported by stronger household consumption and services. allAfrica.com
What 1.2 percent growth means for jobs, debt and prices in South Africa
The bank’s companion Country Focus Report on South Africa quantifies the stakes for households. South Africa’s growth rose to 1.1 percent in 2025 from 0.5 percent in 2024, with unemployment still at 31.4 percent and public debt expected to peak at 78.9 percent of GDP in 2025/26. DevelopmentAid
Growth of 1.2 percent in 2026, rising to 1.6 percent in 2027 on the back of improved energy supply and Operation Vulindlela reforms, would leave job creation lagging well behind the numbers entering the labour market each year. allAfrica.com
There is measurable good news on credibility and costs. The report notes that South Africa’s October 2025 exit from the Financial Action Task Force grey list, after completing 22 anti-money laundering and counter-terrorism financing reforms, strengthened investor confidence and supported Moody’s Ratings’ May 2026 outlook upgrade from stable to positive. allAfrica.com
Inflation across the region is also easing sharply. The outlook projects regional inflation falling from 26.1 percent in 2024 to 12.3 percent in 2025, and further to 8.4 percent in 2026, which reduces pressure on food and transport costs in the hardest-hit economies. DevelopmentAid
Why Southern Africa growth is stalling: the numbers behind the forecast
The bank’s regional and country projections compare as follows:
| Region or country | 2025 | 2026 projection | 2027 projection |
|---|---|---|---|
| Southern Africa | 2.3% | 2.1% | 2.7% |
| South Africa | 1.1% | 1.2% | 1.6% |
| Eastern Africa | 6.6% | 5.9% | Not stated |
| North Africa | 4.4% estimated in 2024 | About 4% | Above 4.2% |
| Africa overall | 4.4% | 4.2% | 4.4% |
Kevin Urama, the African Development Bank’s chief economist, said in remarks reported by SABC News that higher oil and metal prices flowing from the Middle East crisis are not translating directly into growth in these regions because of infrastructure investment shortfalls and structural challenges in production. He confirmed that Eastern Africa is expected to remain the continent’s fastest-growing region despite easing from 6.6 percent to 5.9 percent. sabcnewsSABC News
The deeper diagnosis in the report is about money. The bank estimates that Southern Africa faces an annual development financing gap of about 55 billion dollars, roughly R990 billion at current exchange rates, by 2030, with gross capital formation at around 18.6 percent of regional GDP, below what middle-income economies typically need for sustained transformation. The rand figure is approximate. Ecofin Agency
Kennedy Mbekeani, the bank’s director general for Southern Africa, said the challenge lies in effectively mobilising, managing and deploying existing capital in an increasingly fragmented global economy. Urama urged governments to accelerate implementation of the New African Financial Architecture for Development, describing it as a key tool for financial resilience. DevdiscourseDevdiscourse
What could move the forecast before year-end
The bank flags risks in both directions. On the downside, the region faces higher energy prices, inflation and drier weather conditions that could affect maize production, alongside the possibility that the Middle East conflict tightens global financial conditions further. sabcnews
On the upside for South Africa, Sarah McPhail, lead economist at the South African Reserve Bank, said in comments carried by SABC News that the implementation of structural reforms is expected to drive investment in the local economy despite global uncertainty. sabcnews
These figures are projections, not outcomes. It is not yet confirmed how the Middle East conflict will evolve, whether the 2026/27 summer rainfall season will hit maize output, or whether actual growth will match the bank’s numbers, and Stats SA’s official GDP readings for the second half of 2026 are still months away.
The next fixed markers are Stats SA’s second-quarter GDP release in early September, the Reserve Bank’s Monetary Policy Committee meetings in September and November, and the AfDB’s next regional update in 2027.
