Major economies to drive Africa economic growth in 2025

By Danilo Desiderio

As the new year begins, it is customary to examine growth estimates for various regions around the world in the months ahead. This time, the United Nations has sought to anticipate global development scenarios, an effort reflected in the recently released World Economic Situation and Prospects (WESP) 2025 report.

The WESP 2025 report, produced annually by the United Nations Department of Economic and Social Affairs (UN DESA) in collaboration with the five United Nations regional commissions and other specialized UN agencies, forecasts moderate global economic growth of 2.8 percent in 2025 (unchanged from 2024) and 2.9 percent in 2026.

The report projects that Africa will experience more robust economic expansion compared to other regions, with growth rates expected to reach 3.7 percent in 2025 and 4.0 percent in 2026.

Major continental economies, such as Nigeria, Egypt, and South Africa, are anticipated to be the primary drivers of this growth.

This conclusion aligns with findings from a November 2023 Economist article, which emphasized the need for Africa’s larger economies to initiate a development process capable of catalyzing growth in smaller economies. The article suggests that the expansion of major African economies could exert a “gravitational effect,” pulling smaller economies into their orbit and fostering broader regional development.

How realistic is this scenario, and what mechanisms might enable smaller African economies to “enter the orbit” of larger ones?

The growth of major African economies has the potential to act as a powerful driver of continental economic development

The theory that the growth of larger African economies will generate positive spillover effects for smaller neighboring countries holds considerable merit for two key reasons:

1. Larger Economies as Markets for Smaller Nations. Growing economies often serve as major markets for their smaller neighbors. As larger economies expand, they generate greater demand for goods and services, stimulating intra-regional trade and investment. This increased activity can spur economic development in smaller economies integrated into these trade networks.
2. Promotion of Regional Value Chains. Larger economies play a crucial role in developing regional value chains. Their expanding demand for goods and services stimulates production across the region, encouraging smaller economies to specialize in specific stages of production and integrate into supply chains. Additionally, the foreign direct investment (FDI) attracted by larger economies often extends to regional value chains, bringing capital, technology, and expertise that benefit both core and peripheral economies.

However, the realization of these benefits hinges on the existence of robust infrastructure connecting larger and smaller economies, particularly transportation and logistics networks. Such infrastructure is critical for facilitating the efficient movement of goods and services within regional value chains, thereby reducing costs and improving overall productivity.

It is also essential to acknowledge potential challenges. Competition from larger economies can undermine smaller businesses in certain sectors, while economic dependence on larger economies could render smaller nations vulnerable to external shocks originating in those larger economies.

In conclusion, the growth of major African economies has the potential to act as a powerful driver of continental economic development. Nonetheless, ensuring equitable distribution of these benefits across all African nations is imperative, alongside implementing policies to mitigate any adverse effects.

Addressing infrastructure gaps remains a pressing priority to support the emergence of regional value chains and trade networks. These efforts align with the African Continental Free Trade Area (AfCFTA) framework, which continues to advance regional integration and sustainable development across the continent.

Danilo Desiderio serves as the CEO of Desiderio Consultants Ltd in Nairobi, Kenya, specializing in African customs, trade, and transport policies. He is a customs and trade expert at the World Bank and a senior associate to the Horn Economic and Social Policy Institute (HESPI).