Lower inflationary pressures and eased financial conditions are expected to gradually reduce financing costs in the region, but political and climate risks could weigh on its economic outlook.
Sub-Saharan Africa’s economy is expected to grow by 4.2 per cent in 2025, up from an estimated 3.8% in 2024, according to a report published by Moody’s Ratings on January 8, 2025.
The report, titled “Sovereign – Sub-Saharan Africa: 2025 Outlook Stable as Financing Conditions Improve; but Debt Costs Still High,” notes that this projected growth is higher than the region’s average over the past decade. The last ten years were marked by challenges like the 2014-2016 drop in commodity prices, the COVID-19 pandemic, and inflation spikes caused by the Russia-Ukraine conflict.
This growth will be driven by easing financial conditions, increased investments in infrastructure and energy, faster economic reforms, and an expanding services sector.
Moody’s analysts highlighted that lower inflation and reduced interest rates set by major global central banks will support more relaxed monetary policies in the region, which could gradually lower financing costs. However, these costs are expected to remain higher than before the pandemic.
Many countries will still face challenges in accessing financing. High external debt servicing needs remain a significant risk compared to available foreign exchange reserves. A sustained increase in the value of the U.S. dollar in 2025 could also raise the cost of servicing foreign currency debt.
The report mentions that South Africa and Nigeria, the region’s largest economies, will continue implementing economic reforms to boost growth and financial stability.
South Africa is expected to see gradual progress, supported by significant reductions in power outages. Nigeria is likely to improve its economy by making its foreign exchange market more efficient.