North Africa’s economy is projected to grow by 4.0% in 2026, following an estimated 4.4% expansion in 2025, as industrial activity, services and recovering hydrocarbon production support regional performance. However, persistent debt pressures, geopolitical tensions, climate risks and uneven living standards could limit the benefits for households and businesses, according to the African Development Bank’s regional economic outlook.
The projected growth signals improving economic momentum, but it masks significant differences among Algeria, Egypt, Libya, Morocco, Sudan and Tunisia. While oil and gas revenues remain important to hydrocarbon exporters, countries more dependent on imported energy face higher production costs, pressure on public finances and exposure to disruptions in international shipping and commodity markets.
For governments across the region, the challenge is to translate economic expansion into more jobs, stronger purchasing power and improved public services. Industrial development and investment could strengthen domestic production, but high borrowing costs and debt-servicing obligations risk diverting public resources from healthcare, education, infrastructure and social protection.
The economic consequences are particularly significant for young people facing unemployment and households struggling with food, transport and energy costs. Unless growth generates productive employment and expands opportunities for small businesses, headline economic gains may do little to ease everyday financial pressures or reduce social discontent.
Energy-importing economies, including Egypt, Morocco and Tunisia, remain vulnerable to higher fuel, fertiliser and freight costs. These pressures can raise agricultural production expenses, increase food prices and weaken household consumption. For exporters such as Algeria and Libya, hydrocarbon revenues provide fiscal support, but dependence on oil and gas leaves public spending and economic stability exposed to fluctuations in global energy markets.
Political and security conditions also shape the region’s economic prospects. Sudan’s conflict continues to threaten livelihoods, infrastructure and productive capacity, while instability elsewhere can discourage investment and disrupt trade. Governments must therefore balance fiscal discipline with social spending, economic diversification and measures that protect vulnerable populations from external shocks.
Climate change presents another structural challenge. Drought, water scarcity and unpredictable agricultural conditions threaten rural incomes, food security and employment, reinforcing the need for investment in water management, climate-resilient farming and more efficient energy systems.
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