(MENAFN- The Arabian Post) Sub-Saharan Africa's gross domestic product is now projected to grow by about 3.8 percent in 2025, up from 3.5 percent in 2024, as inflation moderates and foreign exchange markets stabilise across many nations.

The updated outlook emerges from the latest“Africa's Pulse” report by the World Bank, which highlights a more favourable macroeconomic backdrop enabling central banks to ease policy constraints and stimulating consumption and investment.

The revised forecast elevates expectations for the region over the medium term, with growth anticipated to average 4.4 percent annually through 2026 and 2027. The Bank puts emphasis on the urgency of structural reforms to convert headline growth into meaningful job creation.

Macroeconomic headwinds have softened in many countries. Median inflation across Sub-Saharan Africa declined from over 9 percent in 2022 to approximately 4.5 percent in 2024, with projections indicating it may hover between 3.9 and 4.0 percent in 2025–26. Tighter exchange rate pressures in several economies have eased, allowing interest rates to be trimmed in some cases and improving investor confidence in local currencies.

Across major economies such as Nigeria, Ethiopia and Côte d'Ivoire, growth is expected to strengthen underpinned by rebound in commodity exports, stronger domestic demand, and gradual monetary loosening. However, the region's uneven landscape means that gains will not be uniformly distributed. The World Bank notes that excluding South Africa and Nigeria, the rest of the region could grow as fast as 5 percent to 5.3 percent in 2025.

Policy constraints and risks nevertheless persist. Many countries are entrenched in high debt burdens and narrow fiscal space, requiring delicate balancing between austerity measures and investment in growth-supporting sectors. The Bank cautions that trade uncertainty, tightening global credit, and political instability pose significant downside risks to the upgraded forecasts.

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A central challenge remains labour markets. Even with rising GDP, job creation-especially wage-paying and higher productivity roles-lags behind demographic pressures. In 2024, only about 24 percent of employment in the region was in wage-paying jobs; the remainder is concentrated in informal, low-productivity sectors. The Bank warns that the existing growth model fails to absorb the region's expanding working-age population into meaningful employment.

To shift trajectory, the Bank calls for a new growth model anchored in medium and large enterprises rather than micro and informal firms. Reforms to reduce the cost of doing business, improve infrastructure, enhance access to credit, and strengthen regulatory environments are flagged as priorities.

Infrastructure continues to be a drain on growth. Many countries face power shortages, poor transport connectivity, and underdeveloped digital networks. In nations like Mozambique, major hydroelectric projects-including the forthcoming Mphanda Nkuwa dam-seek to close energy deficits and facilitate industrial expansion.

Donors and multilateral actors are also being urged to play a supporting role. The World Bank emphasises the importance of concessional financing, debt restructuring, and technical support, particularly for growth-enhancing public investments that would otherwise be crowded out by debt service.

In Nigeria, growth in the first half of 2025 has already shown signs of acceleration to 3.9 percent, following the removal of fuel subsidies and tax reforms. Foreign reserves crossed $42 billion and the current account swung to a surplus of 6.1 percent of GDP. Public debt, meanwhile, has begun to decline after more than a decade of increases.

Yet, households in many countries still face inflationary pressures - notably in food prices - which erodes real incomes, especially among low-income groups. The Bank underscores that macro gains must translate into social protection, safety nets and inclusive policies to avoid uneven developmental outcomes.

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