Africa’s average inflation rate is projected to decline from 8.6% in 2024 to 7.2% in 2025, according to the February 2025 Afreximbank Research Monthly Developments in the African Macroeconomic Environment report.
The report highlights the historical correlation between inflation and interest rates, particularly during periods of high inflation.
The study indicates that as inflationary pressures subside, central banks may have greater flexibility to adjust monetary policies.
This could spur economic growth, boost consumer purchasing power, reduce borrowing costs, and attract more investment.
Although 18 of the 29 monitored African economies surpassed expectations in 2024, the report predicts that only 11 will continue their growth in 2025.
The report highlights the fragility of economic performance, shaped by political instability, global economic shifts, and regional uncertainties.
Additionally, commodity-dependent nations remain vulnerable to price volatility, reinforcing the importance of strong domestic policies for sustained growth.
The report also highlights how a strong US dollar in early 2025 has pressured African currencies, driven by concerns over trade wars and geopolitical uncertainty.
“Countries with relatively weaker macroeconomic positions, such as Nigeria, Egypt, and Ghana, have faced sharper currency depreciations, exacerbated by inflationary risks, fiscal deficits, and investor concerns,” the report noted.
“Managing exchange rate fluctuations will require a mix of prudent monetary policies, increased foreign investments, and diversification strategies to reduce dependence on volatile external factors”
The report recommends that governments prioritize inflation control, exchange rate stability, and investment-friendly policies to navigate economic uncertainties.
It underscores the need to address structural weaknesses, enhance governance, and implement policies that promote long-term economic resilience.
