Key insights
- African Development Bank projects slower African economic growth in 2026 due to the Iran war's impact on energy, food, and fertilizer prices. This could lead to higher inflation and necessitate tighter monetary policy. While the direct impact on US equities is limited, the report highlights global inflationary pressures and potential supply chain disruptions, indirectly contributing to a slightly bearish outlook.
Investing.com -- African economic growth is projected to slow to 4.2% in 2026 from 4.4% in 2025 before recovering to 4.4% in 2027, the African Development Bank said in its annual economic outlook for the region.
The AfDB warned the projection could be downgraded if the Iran war continues beyond its current timeframe. The conflict, which began in late February, has driven up energy, food and fertilizer prices due to shipping disruptions in the Strait of Hormuz.
If the conflict lasts between three and six months, real gross domestic product growth is projected to decline by 0.4 percentage points to 4% in 2026, the bank said.
The war has affected the region unevenly. Economic activity in West Africa is expected to remain largely unchanged from 2025, while growth in East Africa is projected to slow to 5.9% in 2026 from 6.6% last year. Southern Africa growth is forecast to ease to 2.1% from 2.3%.
The AfDB encouraged oil exporters to save windfall profits from higher crude prices through sovereign wealth funds or other counter-cyclical buffers to help cushion their economies from an expected post-war price correction.
Inflation is forecast to average 10.4% this year, 0.9 percentage point higher than the AfDB’s previous estimate but down from 13.7% in 2025. The decline is attributed to stronger agricultural output and tighter monetary policy. Inflation is expected to remain below 5% in 26 African countries this year.
The bank warned that African central banks need to implement prudent monetary and exchange-rate policies tailored to anchor long-term inflation expectations. It added that central banks must act decisively to prevent higher energy prices from spilling into broader price growth through second-round effects.
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