Africa’s growth outpaces world, as global economy slows

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JEREMY MAGGS: There’s a new global risk review that warns that geopolitical conflict, trade tensions and stubbornly high debt levels are creating a far more fragile economic environment than maybe we originally thought. Take a listen to these numbers.

Global growth is expected to slow to around 2.6% in 2026. Africa, though, is forecast to grow faster at just over 4%. But South Africa once again is lagging the pack, with growth expected to remain below 2%, despite the potential boost from stronger commodity prices.

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I want to pull all of that together for you. I’m in conversation with Aroni Chaudhuri, who’s chief economist for Africa at Coface, a global financial services company specialising in trade credit risk management. Aroni, a very warm welcome. Your report says the global economy is still growing, but under heavy pressure. Are we entering then a period of fragile stability rather than real recovery? What’s your assessment?

ARONI CHAUDHURI: Good morning, thank you for having me. Yes, it’s just as you said. Basically, if you look at how global growth has been over the past year and how it is expected to be during the year, well, obviously the environment is more uncertain than ever. In fact, I think that right now, for those who are listening, when they look at what’s happening in the Middle East, there is room for much concern.

On the other hand, on the economic front, we have seen that the economy has remained relatively resilient. For 2025, the reason behind that, firstly, the shock of US tariffs on the global economy has actually been lower than expected. That is also due to the fact that mainly the cost of tariffs has actually been borne mostly by American companies and consumers.

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The second reason, which I think is even more important, is that companies have adapted remarkably well, which goes to show that the globalisation is certainly not dead. It’s just changing, and there is a change in trade flows and patterns.

However, despite this relative stability, obviously risks are ever high. For instance, if we talk about the main point of concern right now, which is the conflict in the Middle East, if the conflict remains limited in time, then the impact on oil prices is going to be relatively contained and then the impact on global growth will be marginal.

However, if this conflict is protracted and we have a much stronger and sustained spike in oil prices, which in the most extreme scenarios could even go into triple-digit territories, in that case the impact on global growth through much stronger inflation would be stronger and then by extension to all other economies. For now, it is too early to assess. We remain cautious in the way that we’re monitoring these events.

JEREMY MAGGS: But that figure of a 2.6% global growth number, while it does sound respectable right now, I suggest might be under a little bit of a threat. It’s historically quite weak. This also says that the world economy broadly, whether we look at the Middle East or not, is still running far below potential.

ARONI CHAUDHURI: Yes, it’s below potential, certainly. Global growth potential, if you look at market exchange rates, should be slightly above 3%. It is below potential for two main reasons. The first reason for this year’s slowdown is mainly because China is underperforming. So that is one of the main factors why we are transitioning from 2.8% last year to 2.6% this year.

China is underperforming, and in fact, just today the Chinese authorities said their new growth target is not 5% anymore – it is now 4.5% to 5%.

This is for two reasons. One is that obviously Chinese domestic demand is still lacklustre. It is still suffering from the hurdles of its property sector. On the other hand, what China did is that they exported their over-capacities onto other markets in order to reach their growth targets. That is being rendered more difficult because obviously the trade environment is more fragmented and an increasing number of countries are implementing protectionist policies and especially against China, the US being at the head of all of that.

The second reason is that in the advanced economies and in Europe, growth has been under potential for several years now, and it is still going to remain under potential at around 1%. The reason being that although you have a slight uptick in Germany thanks to some fiscal impulse, on the other hand large economies like France, like Italy, are still underperforming. Even the Spanish economy, which had been like a beacon of growth of the large European economies during the last years, is still slowing down. That is mainly because you have low industrial demand and also low levels of consumer confidence.

Lastly, for the US, which is important as the US economy has remained relatively solid despite the impact of tariffs. That is mainly linked to the very large infrastructure investments in AI, which also generates wealth effects. Because, as you know, American consumers, most of their savings are in equity markets. So the valuation in equity market is also helping them through wealth effects.

So that is why you have this stable environment but still gradually slowing down. Because on some of the main markets you have demand side pressures as well as consumers who are very uncertain about the future.

JEREMY MAGGS: Yet a welcome bullishness as far as the continent of Africa is concerned, as I mentioned, forecast to grow to around 4.3%. That’s actually much quicker than the global economy. Are there structural advantages that are driving this resilience? And where are the risk factors?

ARONI CHAUDHURI: For the African continent, let’s say that 4.3% is now reaching closer to the potential of the continent. So that is certainly welcome in this environment. With African countries, most of them – obviously there are 54 countries, so we have to be cautious on making statements on the average – overall, the balance that there is in commodities right now is that it’s basically low prices for food, low prices for oil, with obviously the hypothesis that the oil prices remain low, and the conflict in the Middle East does not spur a significant spike.

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On the other hand, high prices for mineral commodities is basically a good balance for African countries, simply because lower food and energy prices means stronger domestic demands. Higher commodity prices and higher commodity demand means better export performance. So that is good in terms of growth, but also in terms of stronger currencies, which are buffers in a very volatile environment, as well as the capacity to rebuild reserves, which eases up some room for external financing.

Also, you have to keep in mind that the dollar is weak right now.

A weak dollar is generally a good thing for emerging economies because it enables their central banks to keep on easing or to at least maintain their monetary stance and thus stimulate domestic demand.

All of this means that in this environment African countries have some room to grow, but there are many risks.

Obviously, the risk on oil prices. There are climate risks to which most African countries are extremely vulnerable due to the importance of agriculture. And obviously geopolitical, political and security risks at the continent level as well that are still very important. So … just like for the world, Africa also has a lot of risks that could materialise.

JEREMY MAGGS: Just very quickly in conclusion, South Africa is still stuck below 2% growth. At what point do you think slow growth stops becoming cyclical and becomes a permanent structural gap?

South Africa stopped growing in 2009

ARONI CHAUDHURI: For South Africa, it’s already a permanent structural gap. South Africa’s growth potential has now been limited, let’s say for closing on two decades, let’s say at least 15 years. The reason behind that is – there are many reasons – but for me, the two main reasons are that you have such constraints on energy supply and on the labour market. At the same time, you’ve also had a phenomenon of deindustrialisation, which is linked to global and domestic factors.

The combination of these factors means that the potential for an economy like South Africa, which is industrialised, is low. That means that in order to lift the growth potential to one of a more dynamic and emerging market, it should be above 2% and even closing on 2.5% to 3% in the longer term.

There needs to be much more advancement in the structural reforms that have begun on energy, on logistics. But there also needs to be more reforms on the labour market in order to significantly lift the growth potential.

For now, the South African economy is limited by its domestic demand, which is not strong enough because of this issue and also is vulnerable to shifts in the global environment simply because it is very integrated into trade and financial markets.

We will see a slight uptick this year, also because consumption is holding well because inflation is low. But that is not nearly enough to actually spur a growth momentum that would bring the country back onto a more durable growth path.

JEREMY MAGGS: Thank you very much indeed. In conversation there with Aroni Chaudhuri, chief economist for Africa at Coface. I appreciate your time. Thank you.