The African Development Bank’s (AFDB) Regional Economic Outlook report indicates that the Southern African region’s economy is projected to slow from 2.3 % in 2025 to 2.1 % in 2026.
The slowdown in growth is attributed to structural constraints, including limited economic diversification, infrastructure deficits and low domestic resource mobilisation.
Growth in the region is, however, expected to rebound to 2.7 % in 2027, supported by stronger household consumption and improved services activity, among other areas.
The AFDB 2026 Southern Africa Economic Outlook warns that the Middle East conflict is likely to slow regional growth through higher oil prices, trade disruptions and tighter global financial conditions.
It says investment remains below development needs due to limited long-term financing.
The report projects Southern Africa’s growth will slow from 2.3% in 2025 to 2.1% in 2026, while Eastern Africa is expected to remain the continent’s fastest-growing region despite easing from 6.6% to 5.9%.
The Vice-president of the African Development Bank, Kevin Urama, explains that the higher oil and metal prices emanating from the Middle East crisis are not translating directly to growth in these regions because of their infrastructure investments and unexpected structural challenges in production.
“The Eastern Africa region has to continue to trail as the best-performing region of the continent, and the Middle East crisis has an impact on this region because the growth rate is projected to slow from 6.6% in 2025 to 5.9% in 2026, still maintaining the highest growth rate on the continent. Growth rate in North Africa was estimated at 4.4% in 2024 and is projected to fall to about 4% in 2026, and its recovery is expected in 2027 to above 4.2%. Growth rate in Southern Africa is projected to moderate to 2.1% in 2026 from 2.3% in 2025.”
The Southern African region faces myriad global and domestic risks to growth, including higher energy prices, inflation and drier weather conditions, which may affect maize production.
Lead Economist at the Reserve Bank, Sarah McPhail, says despite global uncertainty, the implementation of structural reforms in South Africa is expected to drive investment in the local economy.
