North Africa Growth to Slow Down in 2026, According to African Economic Outlook 2026 Report
The African Economic Outlook 2026 (PEA 2026) report, presented on May 26, 2026, at the Annual Meetings of the African Development Bank Group in Brazzaville, Republic of the Congo, forecasts a slowdown in North Africa's growth from 4.4% in 2025 to 4% in 2026.
Growth Projections
The PEA 2026 report estimates that the growth rate will be 4.2% in 2027, provided that supply chain disruptions are mitigated. The report highlights that disruptions in maritime traffic in the Strait of Hormuz will affect exports to the Middle East, increase the cost of inputs for fertilizers, and raise energy costs for net oil-importing countries such as Egypt, Morocco, and Tunisia.
Tourism Sector Impact
The tourism sector in the sub-region may also be negatively impacted by the war in the Middle East due to a decline in tourist arrivals from Gulf countries.
Inflation Projections
The report notes that inflation will remain below 5% in 26 African countries in 2026. The average inflation rate is projected to be 10.4% in 2026, before declining to 8.9% in 2027. Although the average inflation rate in 2026 remains high, it represents a significant decrease from the 13.7% recorded in 2025, driven by increased agricultural production and the beneficial effects of monetary policy tightening.
Currency Depreciation
As of April 28, 2026, the currencies of 27 countries had depreciated against the US dollar compared to the reference level of February 27, 2026.
Monetary Policy
The report highlights that African central banks reduced their interest rates in 2025, indicating an improvement in medium-term inflation prospects. Between January 2025 and March 2026, the policy rates were reduced by an average of 1.33 percentage points. This led to a real policy rate of 2.8% in terms of real interest rates, according to the PEA 2026 report.
Aid Flows
The report notes that the conflict in the Middle East may lead to a decline in official development assistance (ODA) flows to Africa, increasing the risks to external financing.
Recommendations
The report recommends that African countries reduce their dependence on external sources and explore national opportunities for mobilizing resources to finance their development. The report also emphasizes the need for African countries to implement policies to mitigate the impact of multiple shocks, including monetary and exchange rate policies.
Mobilizing Development Finance
The report highlights the importance of mobilizing development finance at scale to enable Africa to implement its own development program. The report identifies concrete policy options to mobilize large-scale development finance for accelerated and resilient growth and recommends reforms to strengthen and consolidate Africa's financial architecture.
Recommendations for African Central Banks
The report recommends that African central banks implement prudent monetary and exchange rate policies to anchor long-term inflation expectations. The report also recommends that central banks implement budgetary policies to mitigate the effects of rising energy and food prices, reduce business costs, and alleviate pressure on poor and vulnerable households.
Long-term Recommendations
The report emphasizes the need for African countries to diversify their energy mix and energy markets, accelerate investments in renewable energy and gas, and strengthen regional integration and trade to reduce dependence on imports and enhance competitiveness.
African Economic Outlook (PEA)
The African Economic Outlook (PEA) is the flagship annual report of the African Development Bank Group. It provides a platform to present these conclusions and recommendations to a wide international audience and shape the policy debate on effective mobilization and efficient deployment of capital.
