IMF: African economy shows resilience despite shocks from conflict with Iran

The International Monetary Fund (IMF) released its World Economic Outlook report, forecasting robust growth in most Portuguese-speaking economies until 2027. Among these, Angola shows acceleration, while Cape Verde and Timor-Leste maintain a strong expansion pace.

Regarding Sub-Saharan Africa, the IMF estimates that Angola will register 4.4% growth in 2026, surpassing the 3.1% projected for 2025, before moderating to 3.3% in 2027. Despite this, inflation is expected to remain high, falling from 20.2% this year to 10.6% in 2026 and 10.2% in 2027.

Cape Verde is pointed out as one of the best-performing African Lusophone economies, with growth projections of 5% for both 2026 and 2027, following an expected expansion of 6.3% in 2025. In this archipelago, inflation is expected to remain under control, reaching 1.2% this year and 2.8% in 2027, with a stable unemployment rate of 8.5% over the three analyzed years.

In Guinea-Bissau, a slight deceleration in growth is expected, moving from 5.8% in 2025 to 4.7% in 2026, and recovering to 4.9% in 2027. Inflation should remain between 2.1% and 2.5%, but the current account deficit is expected to remain high, ranging between 5.7% and 7% of GDP.

Mozambique is expected to experience a gradual recovery after the estimated contraction of 0.2% in 2025. The IMF forecasts 1% growth in 2026 and 2% in 2027. However, the external deficit remains very significant, corresponding to 41% of GDP in 2026 and 37.8% in 2027. São Tomé and Príncipe anticipates a more modest expansion, of only 0.4% in 2026, accelerating to 1.9% in 2027, although inflation is expected to rise to 11% this year, reducing to 9.6% in 2027.

Outside of Africa, the IMF forecasts a slowdown in Brazil's economic growth, from 2.2% in 2026 to 1.9% in 2027, due to restrictive monetary conditions, reduced budgetary stimulus, and global economic uncertainty. Timor-Leste's economy is expected to grow by 4% in 2026 and 3.7% in 2027, after 4.5% in 2025, keeping inflation contained at 2.1% and 2.2% in the following years, despite a very high current account deficit, at 38.5% of GDP in 2026 and 38.4% in 2027.

Additionally, the growth of the Portuguese economy was revised to 2.1% this year and 1.9% in 2027. The IMF highlighted that world economic activity demonstrates resilience, driven by the technology sector, financial reserves, and the capacity to adapt to geopolitical tensions.

In the global scenario, the institution predicts a slowdown in growth to 3.1% in 2026, followed by a recovery to 3.4% in 2027. Global inflation is expected to rise to 4.7% in 2026 and fall to 4.1% the following year, with energy-importing economies not participating in the technological value chain facing the most challenging prospects.

During his address at KEC 2026, RBI Governor Sanjay Malhotra outlined five priorities for policymakers and urged vigilance regarding emerging systemic risks, which are becoming increasingly interconnected and cross-border.

Sanjay Malhotra, Governor of the Reserve Bank, stated on Saturday that the current stability of the financial system should not be viewed as a guarantee against future vulnerabilities, emphasizing the need for continuous monitoring to ensure financial stability.

Speaking at the Kautilya Economic Conclave, he presented five areas of focus for politicians, stressing that the focus of financial stability should shift not to preventing shocks, but to strengthening the financial system's ability to withstand and contain their consequences.

He noted: 'Today's stability does not necessarily imply immunity tomorrow, and we strive to remain vigilant about emerging vulnerabilities and continue to keep our financial system strong and resilient,' he added, mentioning the reliability of the financial system supported by healthy bank and NBFC balance sheets.

According to him, shocks, whether domestic or external, are inevitable, and the main goal is to create a financial system capable of providing financial services even under severe stress.

Malhotra also pointed to a new generation of systemic risks that are becoming increasingly exogenous, cross-border, and interconnected. He suggested that the next financial crisis might originate not in a bank or even the financial sector, but from a geopolitical event, cyberattack, or technological failure, affecting the financial system through multiple channels.

The Governor stressed the importance of better understanding network dependencies and contagion channels, insisting that scenario analysis must become the cornerstone of risk management.

Furthermore, the RBI Governor called for improving monitoring and assessment frameworks by using more detailed and granular data. He noted that information on Non-Banking Financial Institutions (NBFI), interconnected exposures, technological developments, and cross-border positions can remain fragmented, and the quality of this data will increasingly determine the quality of risk assessment in an interconnected financial system.

He also stated that stability must be 'systemic,' as a strong banking system, while necessary, is insufficient. Stability is required across all sectors: in NBFI, financial markets, payment systems, technology infrastructure providers, critical third parties, and cross-border financial networks.

Regarding financial innovations, Malhotra reported that technologies such as artificial intelligence and tokenization, as well as new forms of financial intermediation, can significantly enhance efficiency; however, innovations must not undermine the foundations of trust in the financial system. He specifically highlighted fundamental properties that must be preserved: institutional reliability, finality of settlements, unity of money, and financial integrity.

He concluded that the task is to build a financial system capable of withstanding both predictable and unforeseen shocks. This will require resilient institutions, improved data, deeper markets, robust safeguards, effective resolution mechanisms, as well as regulation and supervision that are proactive and farsighted while remaining proportionate. 'If we succeed, financial stability will largely go unnoticed, and in central banking, invisibility is perhaps the most valuable and significant measure of success,' he added.