Editorial: New external shock threatening outlook…

The International Monetary Fund’s April Regional Economic Outlook for sub-Saharan Africa highlights high cost of doing business, weak state-owned enterprises and limited regional trade integration as key constraints holding back productivity, investment and long-term growth across the region.

The Fund stresses that fast-tracking the African Continental Free Trade Area agenda, particularly reducing non-tariff barriers and modernising Customs systems, will be key to lowering trade costs, strengthening supply chains and expanding markets for local businesses.

After a strong 2025 with regional growth estimated at 4.5 percent, sub-Saharan Africa entered 2026 reaping the benefits of hard-won stabilisation gains. But war in the Middle East has clouded the outlook.

The shock has caused a rapid increase in key commodity prices, particularly fuel and fertiliser. Poverty, food insecurity and other social indicators, already weakened by the pandemic, face renewed headwinds from declining foreign aid and rising food prices.

The Middle East war is a major new external shock. Oil, gas and fertiliser prices have surged. Shipping costs have risen.

Accordingly, the IMF has revised its growth forecast downward to 4.3 percent in 2026; some 0.3 percentage points below pre-war projections, with median inflation expectedly rising to 5 percent by year-end.

In the near-term, countries must keep inflation expectations anchored and protect the most vulnerable through targetted, time-bound support. Over the medium-term, accelerating structural reforms is essential to unlock private-sector-led growth.

In a shifting geopolitical landscape, regional integration – particularly through the African Continental Free Trade Area – can boost resilience and open new opportunities.

Progress on the outstanding African Continental Free Trade Area agenda, including reducing non-tariff barriers, modernising Customs procedures and deepening trade in services, will help lower trade costs, speed up clearance and create larger and more diversified markets for local goods and services.

Central banks will need to monitor price developments carefully and adjust policies if inflation expectations drift up. Central bank independence and clear policy communication will be key to maintaining price stability and anchoring inflation expectations, amid strong exchange rate pass-through to inflation.

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