Keypoints:
- Regional growth accelerated to 6.6 percent
- Eight economies remained below 5 percent
- Annual financing gap estimated at $119bn
EAST Africa remained the continent’s fastest-growing region in 2025, with real GDP growth accelerating to an estimated 6.6 percent from 4.3 percent in 2024, according to the African Development Bank Group (AfDB).
The strong regional figure reflects resilient household consumption, higher public and private investment, improved agricultural production and continued services expansion. Yet the AfDB warns that uneven national performance, weak industrialisation and a large financing gap could prevent rapid growth from delivering enough jobs or broad improvements in living standards.
Domestic demand powers expansion
Ethiopia, Rwanda, Tanzania and Kenya recorded some of the region’s strongest performances, supported by infrastructure spending, construction, services and stronger agricultural output. Uganda is also expected to remain among East Africa’s leading growth economies over the medium term.
East Africa’s performance placed it above the continental average and reinforced Africa’s growing presence among the world’s fastest-expanding economies. That wider trend is examined in Africa’s global growth outlook for 2026.
Inflation also eased, falling to an estimated 15.3 percent in 2025 from 19 percent in 2024. Tighter monetary conditions and lower commodity-price pressures helped, although exchange-rate weakness, foreign-currency shortages and dependence on imports continued to expose several economies to external shocks.
Regional average masks disparities
The 6.6 percent average concealed sharply different outcomes across the 13 economies covered by the outlook. Eight recorded growth below 5 percent, showing that the regional acceleration was neither uniform nor equally felt.
The figures underline how conflict, fiscal pressures and limited productive capacity continue to produce different economic outcomes across East Africa. Growth also remained heavily dependent on services, household consumption and public investment, while industrial expansion was modest.
That pattern limits the region’s ability to create large numbers of productive jobs, diversify exports and reduce vulnerability to climate shocks or changes in global commodity prices.
Growth set to moderate
The AfDB expects regional growth to ease to 5.9 percent in 2026 as geopolitical tensions, higher energy and fertiliser prices, tighter financing conditions and supply-chain disruption weigh on activity.
Growth is forecast to recover to 6.4 percent in 2027 as supply pressures ease and investment in infrastructure, reforms and regional integration begins to support stronger output.
The AfDB-backed Tanzania–Burundi–DR Congo railway, including the Tabora–Kigoma section, shows how transport investment could connect producers to ports and strengthen regional trade.
Financing gap threatens progress
The region faces an estimated annual development financing gap of about $119bn, restricting investment in infrastructure, industrialisation, climate resilience and employment.
Closing that gap will require governments to improve project preparation and policy certainty, enabling domestic and international investors to commit long-term capital at more sustainable costs.
The AfDB called for stronger domestic resource mobilisation, deeper capital markets, improved public financial management and greater private-sector participation. It also urged governments to mobilise pension funds, diaspora capital and other long-term African financing.
These recommendations echo the broader push to unlock more domestic capital through stronger tax compliance, administration and policy design, an issue explored Africa’s $469bn revenue opportunity.
East Africa’s 2025 performance represents genuine economic momentum. But the region’s success will ultimately depend on whether rapid GDP growth produces competitive industries, resilient public finances, stronger exports and employment opportunities for its expanding population.
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