AfDB Raises East Africa's 2026 Growth Forecast to 6.7% as Ethiopia and Rwanda Accelerate

The African Development Bank has raised its 2026 economic growth forecast for East Africa to 6.7%, an increase of 0.8 percentage points from its May projection of 5.9%, following stronger than expected economic performance in Ethiopia, Rwanda and several other countries. The revision, published on November 13 in the bank's latest Africa's Macroeconomic Performance and Outlook, places East Africa ahead of every other African region and substantially above the continental growth forecast of 4.6%, reinforcing the region's position as one of Africa's principal centres of economic expansion. The bank now expects East Africa's economy to grow by 6.7% in 2026, compared with an estimated 6.6% in 2025 and 4.3% in 2024. Growth is projected to moderate to 6.3% in 2027, remaining above the continental forecast of 4.5%. The revised outlook marks a substantial change from May, when the AfDB anticipated that higher oil and fertiliser prices, supply disruptions and geopolitical tensions would reduce regional growth to 5.9% during 2026. The November assessment indicates that several East African economies have performed more strongly than previously anticipated despite those external pressures. According to the AfDB, growth forecasts were revised upwards for eight of the region's 14 economies, with particularly substantial changes recorded in Ethiopia and Rwanda. Ethiopia's forecast increased from 7.8% to 9.3%, while Rwanda's rose from 6.9% to 8.5%. Sudan also received an upward revision of 1.3 percentage points to 3.4%, reflecting the reported stabilisation of some urban and commercial centres after prolonged conflict. The improvements have contributed to a wider revision of Africa's economic outlook. The AfDB now forecasts continental growth of 4.6% in 2026, compared with 4.2% in its May assessment. The bank attributes the improvement to several factors, including stronger commodity earnings among exporting countries, policy measures that have helped energy importing economies absorb higher costs and better than anticipated domestic economic activity. The revised figures nevertheless require distinction between projected output growth and broader economic welfare. Rapid increases in real GDP can occur alongside high inflation, foreign exchange shortages, rising borrowing costs and limited improvements in household purchasing power. East Africa's projected 6.7% expansion therefore provides evidence of stronger economic production across the region, while the distribution of the benefits will depend on employment, wages, agricultural performance, business investment and the ability of governments to manage fiscal pressures. Ethiopia's Growth Forecast Rises to 9.3% on Gold Mining and Industrial Expansion Ethiopia has received one of the largest upward revisions in the African Development Bank's November outlook, with its 2026 economic growth forecast increasing from 7.8% to 9.3%. The bank attributes the improvement principally to renewed gold mining activity and stronger industrial production, two sectors that have supported economic expansion alongside reforms affecting the foreign exchange market, monetary policy and investment conditions. The revised forecast follows an estimated 9.8% expansion during Ethiopia's 2024/25 financial year, according to the AfDB's Ethiopia Country Focus Report 2026, published on November 3. The report identifies stronger industrial production, export performance and increased external financial inflows as contributors to economic activity. It also indicates that Ethiopia's fiscal deficit narrowed to approximately 1.6% of GDP, while its current account balance moved closer to equilibrium. Gold mining has become an increasingly consequential contributor to the country's economic performance because additional production can generate export revenue and foreign exchange earnings, particularly where international prices remain favourable. Increased mining activity also supports related transport, services and commercial operations. Industrial expansion can contribute through manufacturing output, employment and demand for electricity, machinery and intermediate products, although the domestic economic benefits depend on how much value is created within Ethiopia and how production connects with other sectors. Ethiopia's recent economic reforms are also relevant to interpreting its performance. Changes to the foreign exchange system have altered the availability and pricing of foreign currency, while monetary reforms are intended to strengthen macroeconomic management. These changes can improve resource allocation and access to external financing over time, but they can also create adjustment costs for businesses and households exposed to higher imported input prices or domestic borrowing expenses. The country's growth figures require additional statistical care because Ethiopia has revised its national accounts methodology and GDP base year. A rebasing exercise can change the measured size and composition of the economy by incorporating updated information about production and business activity. However, a statistical increase in measured GDP does not represent an equivalent immediate increase in goods and services produced. Comparisons with previous years should therefore use consistent national accounts series wherever possible. Despite the stronger outlook, the AfDB continues to identify risks associated with debt pressures, inflation, limited foreign exchange reserves, domestic conflict and the financial condition of state owned enterprises. These constraints affect the government's capacity to finance infrastructure and public services, while private businesses remain exposed to import costs, financing conditions and uncertainty over access to foreign currency. The 9.3% forecast therefore reflects an expectation of substantial economic expansion, but Ethiopia's capacity to sustain that performance will depend partly on whether mining and industrial output translate into stronger export earnings, productive investment and improvements in household incomes. Rwanda's Forecast Climbs to 8.5% Despite Severe Inflation Pressures Rwanda's 2026 economic growth forecast has increased to 8.5%, compared with the AfDB's earlier projection of 6.9%. The 1.6 percentage point upward revision follows an estimated 9.4% expansion in 2025 and continued activity in services, construction, manufacturing and agriculture, indicating that Rwanda has maintained substantial momentum despite increasingly difficult domestic price conditions. Economic activity during the first half of 2026 provides support for the more favourable outlook. In October, the International Monetary Fund reported that Rwanda's real GDP had increased by 9.7% during the first six months of the year, although the Fund's own full year projection stood at 7.8%. The difference between the IMF and AfDB estimates reflects separate forecasting exercises, institutional assumptions and assessment dates rather than a confirmed disagreement about measured economic output. Rwanda's strong production figures are occurring alongside one of the region's sharpest inflation accelerations. According to the National Institute of Statistics of Rwanda, national consumer prices increased by 26.5% in October 2026 compared with the corresponding month in 2025, while rural inflation reached 31.3% and urban headline inflation stood at 19.5%. Rural food and nonalcoholic beverage prices increased by 43.5%, placing substantial pressure on households whose expenditure is heavily concentrated on essential consumption. The distinction between urban and national inflation is particularly relevant when assessing Rwanda's economic performance. The urban measure is used as the principal inflation indicator for monetary policy, while the national index incorporates price movements affecting both urban and rural households. The difference between the two reflects the severity of food price pressures in rural areas and the importance of agricultural consumption in household expenditure. High economic growth and high inflation can occur simultaneously because the two measures describe different aspects of the economy. Real GDP growth measures changes in the volume of production after adjusting for prices, while inflation measures changes in consumer prices. An economy may produce more goods and services even as households experience a substantial increase in the cost of food, transport, housing and other necessities. The result can be strong national output figures alongside declining purchasing power among households whose incomes do not increase sufficiently. Rwanda's fiscal and external balances introduce additional constraints. The AfDB estimated public debt at approximately 75% of GDP in 2025, with the fiscal deficit equivalent to 5.5% and the current account deficit reaching 13.1%. Large infrastructure investments require imported equipment, machinery and other inputs, creating demand for foreign exchange and placing pressure on external financing. The bank has also identified declining grant financing, higher borrowing costs and debt servicing requirements as constraints on Rwanda's development financing model. These pressures complicate the policy choices facing the government and the National Bank of Rwanda. Continued investment is supporting economic output, but inflation management may require tighter financing conditions that increase borrowing costs for businesses and households. Fiscal policy must also balance infrastructure commitments with debt servicing and the need to maintain sustainable public finances. The revised 8.5% growth projection therefore reflects strong expected economic activity, while the inflation and financing figures demonstrate why growth alone provides an incomplete picture of Rwanda's economic conditions. East Africa Extends Its Growth Advantage Over Other African Regions The AfDB's November forecast places East Africa 2.1 percentage points above the continental growth projection for 2026. North Africa is expected to grow by 4.7%, followed by West Africa at 4.6%, Central Africa at 4.2% and Southern Africa at 2.8%. The regional comparison shows that East Africa's expected expansion is considerably faster than that of Southern Africa, where major economies continue facing relatively weaker growth, and ahead of other regions experiencing improvements in mining, services and manufacturing. African region2025 estimate2026 forecast2027 forecastEast Africa6.6%6.7%6.3%North Africa4.5%4.7%4.2%West Africa4.8%4.6%5.0%Central Africa3.8%4.2%4.4%Southern Africa2.3%2.8%3.0%Africa overall4.5%4.6%4.5%Source: African Development Bank, Africa's Macroeconomic Performance and Outlook, November 2026. Figures for 2025 are estimates; figures for 2026 and 2027 are forecasts. East Africa's growth is supported by more countries than Ethiopia and Rwanda alone. Tanzania's expansion has been associated with infrastructure investment, mining, agriculture and services, while Kenya's economy draws substantial activity from financial services, trade, telecommunications, transport and domestic consumption. Uganda continues to invest in infrastructure and petroleum development, while Djibouti benefits from logistics and transport services associated with its strategic position on the Red Sea. The economic conditions of these countries differ considerably, but their combined activity contributes to the region's relatively high projected growth. The classification used by the AfDB requires clarification. Its East Africa statistical region covers 14 economies and extends beyond the membership of the East African Community. The two groupings overlap but are not identical, meaning that the 6.7% regional forecast should not be described as an official aggregate growth estimate for the EAC. The inclusion of countries with different economic structures, population sizes and growth rates also influences the regional average. The improvement from May's 5.9% projection is particularly notable because the AfDB had previously expected higher energy and fertiliser costs to weaken economic performance. In its July East Africa Economic Outlook 2026, the bank identified disruptions linked to Middle East tensions, rising import bills and tighter financing conditions as constraints on regional growth. The November revision indicates that the economic activity recorded and anticipated across several countries has been sufficient to produce a more favourable outlook despite those pressures. The upward revision does not establish that the risks identified earlier have disappeared. East African economies remain exposed to international petroleum prices, agricultural production shocks, exchange rate movements and interruptions to regional trade. Countries also differ substantially in their dependence on imported fuel, financial position, export structure and access to international capital. Inflation, Debt and External Financing Remain Major Constraints The African Development Bank expects inflation across Africa to average 9.5% in 2026, compared with 13.4% in 2025, reflecting a broader easing of price pressures across several economies. East Africa's projected average inflation of 11.4% remains above the continental figure, however, indicating that the region's strong growth is occurring alongside persistent pressure on household consumption and business costs. Inflationary conditions differ sharply between individual countries. Rwanda's October national inflation reached 26.5%, while Ethiopia continues facing elevated price pressures associated with domestic supply conditions and the effects of economic reforms. Tanzania has maintained considerably lower inflation than several neighbouring economies, although its businesses remain exposed to international fuel costs and other imported inputs. These differences affect the ability of households to maintain purchasing power and influence the borrowing costs faced by businesses. The AfDB identifies higher energy costs, climate related agricultural disruptions and political instability among the principal threats to the outlook. Renewed conflict in parts of Ethiopia and the Democratic Republic of Congo, together with disruptions associated with disease outbreaks and regional trade, could weaken transport connections, investment and commercial activity. Fiscal conditions present another constraint. The AfDB projects that Africa's average fiscal deficit will narrow to 4.3% of GDP in 2026 and 4.0% in 2027, but the continental improvement conceals differences between regions and countries. Governments facing substantial debt servicing costs have less flexibility to finance infrastructure, education, healthcare and industrial development without additional borrowing or higher domestic revenue. External financing pressures are equally relevant because many East African investment programmes depend on imported machinery, equipment and capital goods. Infrastructure construction can increase economic activity while also raising foreign exchange demand, particularly before projects begin generating additional exports or commercial income. Governments must therefore manage the relationship between investment expenditure, borrowing conditions and the foreign currency earnings needed to service external obligations. The AfDB's revised growth figures provide a stronger outlook for economic production, but they do not establish that the benefits are being distributed evenly across households or businesses. Ethiopia's mining and industrial expansion, Rwanda's investment supported growth, Tanzania's infrastructure and services activity and Kenya's commercial sector all operate under different financial conditions and face different constraints. For investors, the updated projections indicate substantial demand for goods, services, transport, energy and finance across East Africa. The commercial opportunity will nevertheless depend on individual country conditions, particularly inflation, exchange rate stability, borrowing costs, regulatory arrangements and the availability of infrastructure. The November outlook places East Africa at the centre of the African Development Bank's improved assessment of the continent's economic prospects. With projected growth of 6.7% in 2026, the region is expected to expand faster than the rest of Africa, supported particularly by upward revisions in Ethiopia and Rwanda. The strength of that performance will become clearer as national statistical agencies publish full year results and as governments confront the financing, inflation and debt pressures accompanying continued investment. Sustaining the region's growth advantage will require more than maintaining high levels of economic expenditure. Its longer term value will depend on whether investment increases productivity, expands employment, strengthens exports and generates sufficient domestic revenue to finance development without creating unsustainable obligations.