Washington D.C. — The International Monetary Fund has downgraded its economic growth projections for Sub-Saharan Africa following the outbreak of the US-Israel conflict with Iran, warning that the region faces a compounded set of headwinds that could derail recent fragile economic gains.
Speaking at the launch of the IMF’s World Economic Outlook report during the Spring Meetings in Washington, division chief Deniz Igan said the conflict had forced a significant reassessment of the global economic landscape. “We have a downgrade on growth by 0.4 percentage points cumulatively for 2026 and 2027, and median inflation in Sub-Saharan Africa is projected to go up from 3.4% in 2025 to 5% in 2026,” she stated.
The report identifies three primary channels through which the conflict is impacting African economies: a negative supply shock as higher commodity prices raise production costs; amplified inflation pressures risking wage-price spirals in economies with fragile expectations; and tighter financial conditions driven by falling asset valuations, capital flight, and a strengthening US dollar.
The closure of the Strait of Hormuz — the world’s most critical oil shipping chokepoint — has triggered the most severe energy shock since 2022. Oil and gas prices have surged, dragging up the cost of diesel, jet fuel, fertiliser, and aluminium across global markets.
The impact is particularly acute for African nations that depend on imported fuels and fertilisers, with low-income energy importers facing the greatest strain. Countries already burdened by high debt levels and limited fiscal buffers are especially vulnerable, the IMF warned.
The fund’s baseline scenario projects a moderate 19% rise in energy prices, with global growth falling to 3.1% and headline inflation rising to 4.4%. Under a more adverse scenario — characterised by deeper supply disruptions — growth could drop to 2.5% while inflation climbs to 5.4%. A severe scenario in which energy shortages persist into 2027 would push global growth down to 2% for two consecutive years with inflation exceeding 6%.
Also weighing on African growth prospects is the reduction in foreign aid flows, with bilateral aid cuts ranging from 16 to 28% in 2025 alone. The IMF projects this trend will continue, removing a support structure that many Sub-Saharan economies have relied upon during periods of fiscal stress.
Despite the grim near-term outlook, the fund suggested the crisis could accelerate structural transitions — including faster adoption of renewable energy — that would strengthen resilience to future shocks. Advances in artificial intelligence also offer long-term productivity gains, though with uneven labour market effects.
IMF chief economist Pierre-Olivier Gourinchas struck a cautious note of optimism, saying that “a more multipolar world need not be a more fragmented one” and that countries are finding new trade partners beyond traditional geopolitical lines. He emphasised that swift cessation of hostilities and the reopening of the Strait of Hormuz would significantly limit the economic damage.
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*Sources: African Business, IMF World Economic Outlook, Reuters*