Smarter industrial policy can advance Africa’s economic transformation and create jobs
WASHINGTON, April 8, 2026–Sub-Saharan Africa’s economic recovery from a decade of global shocks is showing signs of stalling, with growth projections for 2026 revised downward by 0.3 percentage points from estimates previously published in October 2025, according to the latest edition of the Africa Economic Update, the World Bank Group’s biannual economic report for the region.
Geopolitical risks–including the conflict in the Middle East, high debt-service burdens and long-standing structural constraints, continue to weigh on the region’s capacity to accelerate growth and create jobs. The report, formerly titled Africa’s Pulse, finds that growth for 2026 in Sub-Saharan Africa is holding at 4.1%, the same pace as in 2025, but downside risks are mounting. Rising fuel, food, and fertilizer prices, alongside tighter financial conditions, are likely to push inflation higher, disrupt economic activity, and disproportionately affect the most vulnerable households which spend a larger share of their income on food and energy.
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“In the short term, governments should target scarce resources to protect the most vulnerable households. At the same time, maintaining macroeconomic stability—by controlling inflation and exercising prudent fiscal management—will be essential to navigate the current shock and position African countries for a faster recovery once the crisis subsides,” said Andrew Dabalen, World Bank Group Chief Economist for the Africa Region.
High public debt and rising debt service costs continue to limit countries’ ability to fund development priorities and invest in foundational infrastructure needed to create more and better jobs. Overall, public capital investments are still about 20% below their 2014 level, while the ratio of external public debt service to revenue has doubled over the past eight years–from 9% in 2017 to 18% in 2025. In addition, inflation is projected to rise to 4.8% in 2026, driven largely by the effects of the conflict in the Middle East. Declining external financing, particularly reduced development assistance, is adding pressure for low-income countries.
With more than 620 million people expected to enter Africa’s labor force by 2050, countries must shift toward growth that is more productive, diversified, and private-sector-led to create jobs. This will require coordinated action at the regional, national, and sectoral levels, supported by investments in infrastructure, skills, and institutions that lower the cost of doing business and attract private investment.
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A special focus of the Africa Economic Update is on industrial policy as an instrument of economic growth and job creation. Countries use it as a tool to expand specific industries and position themselves to benefit from growing demand for African goods ranging from minerals that are critical for emerging technologies to pharmaceutical products. The report notes that countries should aim for policies that promote rapid learning and strategically move the economy towards higher-value goods and services that could create more and better jobs. Well-designed industrial policies can help unlock productivity gains and job creation, but only if they are grounded in a realistic understanding of country opportunities and constraints and used sparingly. These policies should be supported by strong implementation capacity, and embedded in broader ecosystems that include reliable infrastructure, skilled labor, access to finance, and regional market integration.
Getting industrial policies right in Africa will depend on disciplined policy implementation, promoting economic activities rather than firms, clear performance benchmarks, credible exit strategies, and deeper regional integration, including through the African Continental Free Trade Area. Without these foundations, industrial policy risks creating ineffective isolated enclaves rather than broad-based economic transformation.
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