Sub-Saharan Africa’s economic growth is expected to improve to an average 4.2% this year from an estimated 3.8% in 2024, boosted by investments in energy and infrastructure and an expanded services sector, according to Moody’s Ratings.

The US company lifted its outlook for the region’s credit fundamentals to stable from negative, saying fiscal consolidation efforts would help reduce debt. That’s despite ongoing social, political and environmental risks in countries such as Ivory Coast and Mozambique.

South Africa and Nigeria, the region’s two biggest economies, are both making reforms that boost their creditworthiness and economic-growth prospects, Moody’s said in a report dated January 8. South Africa will take time to show major improvement even as power cuts ease, while Nigeria is expected to continue with efforts to establish a better-functioning foreign-exchange market.

Average economic growth in sub-Saharan Africa is likely to be higher than in the past decade in part due to a series of shocks, including the commodity-price plunge of 2014-16, the Covid-19 pandemic, and the inflation surge following Russia’s 2022 invasion of Ukraine, Moody’s said.

However, a renewed loss of access to global capital markets, rising refinancing risks and as-yet-unknown inflationary pressures would threaten stability, Moody’s said. A sustained appreciation of the dollar in 2025 could raise the cost of servicing foreign-currency debt, the group added.

Moody’s expects foreign direct investment inflows to remain strong for countries producing commodities needed to battle climate change, such as the Democratic Republic of Congo. Economic growth in Angola and the Republic of the Congo is expected to strengthen in 2025 due to new oil and gas projects, offsetting declining yields from aging fields.

Still, not all sub-Saharan countries are expected to have stronger economic growth due to rising populations — a longstanding challenge in Africa. The continent is also susceptible to environmental risks, such as a severe drought in Zambia that disrupted hydropower and mining production, offsetting the benefits of high copper prices.

Political risks are another factor. Ivory Coast, one of the drivers of a rating upgrade by Moody’s last year, is due to hold elections later this year in which President Alassane Ouattara could seek a controversial fourth term.

In Mozambique, opposition leader Venâncio Mondlane who directed the biggest protests the southeast African nation has seen after official results showed he lost Oct. 9 presidential elections to ruling-party candidate Daniel Chapo has returned to the country.