Sub-Saharan Africa has shown surprising resilience seven months into the Middle East conflict, which has driven up oil prices. Unlike the 2022 oil shock, the region has managed to limit the deterioration of its external accounts and keep inflation in check. However, this stability is fragile and could erode further as the conflict continues. An exceptional El Niño event in 2027 threatens to exacerbate the macroeconomic challenges.
Economic growth in the region remains robust, with GDP growth holding steady in the first half of 2026. The IMF revised its regional forecast upward to 4.5% for the full year, matching 2025's performance. High prices for export commodities like gold, copper, and platinum have helped cushion the impact on terms of trade and external accounts. Currency depreciation against the US dollar has been moderate, averaging 2.3% since February.
Inflation is rising but remains contained, thanks to restrictive monetary policies, fuel subsidies, and recent macroeconomic reforms. Few central banks have tightened policy since February, with South Africa, Uganda, and Tanzania among the exceptions. However, governments capping fuel prices are seeing public finances deteriorate, as seen in Senegal, where energy subsidies will exceed 3% of GDP in 2026.
The region's vulnerability to climate shocks, particularly through the agricultural commodities channel, poses significant risks. Sub-Saharan Africa is more exposed to growth downturns and inflation from rising food prices than other regions. El Niño is expected to intensify droughts in Southern Africa and flooding in East Africa, threatening infrastructure and electricity generation. Countries like Zambia, with high dependence on hydropower, are particularly at risk.