…despite mounting geopolitical tensions
Moroke Sekoboto
ECONOMIC growth in Sub-Saharan Africa, including Lesotho, has held up in 2026 despite heightened geopolitical tensions and a range of regional and domestic headwinds.
According to the latest World Bank African Economic Update, released this week, the ongoing conflict in the Middle East and the war in Ukraine continue to weigh on global economic activity, while heightened trade policy uncertainty, financial market volatility and declining development assistance are also undermining growth prospects.
Within the region, mounting debt-service burdens and limited fiscal space have constrained policy support in several countries. Economic activity has also been affected by localised disruptions, including the Ebola outbreak in the Democratic Republic of Congo, climate-related shocks in parts of the region, and persistent political and security challenges.
In Lesotho, domestic inflation eased to 2.6 percent in August 2026 from 2.9 percent in July 2026, reflecting a decline in food prices and slower price increases in clothing and restaurant services.
Inflation is projected to rise to 4.4 percent in 2027, mainly on account of higher food prices.
Central Bank of Lesotho (CBL) Governor, Dr Maluke Letete, said during the 121st Monetary Policy Committee (MPC) meeting a fortnight ago, that weather-related disruptions to food supplies, higher oil prices and fuel levies, and the pass-through of increased operating costs to consumer prices posed upside risks to the inflation outlook.
Dr Letete said domestic economic activity rebounded in July 2026 following a contraction in the preceding month.
He said the rebound was mainly underpinned by construction, manufacturing and transport, although domestic demand remained weak.
Real GDP growth is expected to remain modest in 2026 before gradually picking up in 2028.
“The outlook remains vulnerable to labour-market weakness, subdued domestic demand, challenges in the mining sector and external uncertainty. Private-sector credit increased by 1.5 per cent in July 2026. Business credit grew faster than household credit. Despite this credit growth, the credit-to-deposit ratio declined to 52.7 per cent,” Dr Letete said.
He said the developments pointed to adequate liquidity in the banking sector, manageable credit conditions and limited evidence of broad-based demand pressures.
According to the World Bank African Economic Update, growth in the region was projected to increase from 4.1 percent in 2025 to 4.3 percent in 2026.
The report said the growth forecast for this year had been revised upwards by 0.3 percentage points from the April 2026 edition of the Africa Economic Update, owing to stronger-than-expected economic performance across several countries in the region.
“The upward revision to growth reflects a mix of cyclical and structural factors. In some countries, growth is benefiting from commodity-supported recoveries, particularly among oil exporters, while in others it is being driven by agricultural rebounds, strengthening domestic demand, and structural reforms that are improving the business environment and boosting investment.
“The region’s growth performance has been supported by robust global trade and sustained external demand. The economic spillovers from the Middle East conflict have been transmitted primarily through higher energy and transport costs and heightened uncertainty rather than through a significant slowdown in external demand,” the report said.
The report said investments in the energy transition, artificial intelligence (AI) and digital infrastructure had sustained demand for critical minerals and other technology-related inputs, supporting export earnings and investment across several African economies.
Economic activity in the region has also benefited from improved domestic resilience.
“Over the past two years, African governments have improved their fiscal balances, while central banks largely brought inflation under control. As a result, domestic demand has remained strong, with improved agricultural output in many countries. Firms and households have met these challenges with strong consumer and business confidence, and the experience of previous crises has improved their ability to adapt to systemic shocks,” the report said.
Additionally, stronger intraregional demand and favourable terms-of-trade effects for several commodity exporters have helped cushion the impact of volatile commodity markets.
The report said growth in Sub-Saharan Africa was therefore expected to continue gradually strengthening, although significant differences between countries persisted.
“Aggregate performance, however, masks the fact of a region that is growing at different speeds. Commodity exporters, particularly those producing oil, metals, and minerals, are benefiting from more favourable terms of trade, while a number of diversified economies are recording robust growth driven by stronger non-resource activity and structural improvements.”
Growth in per capita income, however, remains modest.
“Growth per capita in Sub-Saharan Africa is projected to increase from 1.6 percent in 2025 to 1.8 percent in 2026, and to strengthen further to an average of 2.0 percent per year in 2027–28. The projected pace of per capita income growth remains modest compared to the levels needed to generate substantial reductions in extreme poverty or create sufficient employment opportunities for the region’s rapidly growing labour force.”
The World Bank warned that risks to the outlook remained tilted to the downside, particularly if the conflict in the Middle East intensified or its economic effects persisted.
“Risks to the outlook remain tilted to the downside, particularly if the conflict in the Middle East intensifies or its economic effects persist. A further escalation could trigger renewed increases in global prices for energy, fertilizers, and food commodities, exacerbating inflationary pressures and weakening external and fiscal balances in net oil-importing economies across the region,” the report said.
