The European Bank for Reconstruction and Development (EBRD) has projected Egypt's economy to grow by 4.2 per cent in the fiscal year 2025 ending next June and 4.7 per cent in the fiscal year 2026. According to its latest Regional Economic Prospects report, EBRD's forecasts indicate a positive trajectory; however, they are slightly lower—by approximately 0.3 percentage points—than the estimates published in September 2024. Economic Recovery and Sectoral Growth EBRD's report expects Egypt's output growth is expected to increase from 2.4 per cent in FY 2024 to 3.6 per cent in FY 2025 before further accelerating to 4.6 per cent in the following year. The growth comes as "business confidence recovers and structural reform progresses." On a calendar-year basis, Egypt's growth is forecast at 4.2 per cent in 2025 and 4.7 per cent in 2026. "Growth in FY25 is expected to be led by the communications, accommodation and food, transportation, and storage (excluding the Suez Canal) and financial services sectors." EBRD report also said Egypt's manufacturing sector also started recovering following a contraction in the previous year while extractive sectors posted the sharpest contractions. Inflation Inflation slowed to 24 per cent in January 2025. EBRD said prices will likely continue to fall due to base effects and tight monetary policy. However, necessary adjustments to fuel prices may pose some inflationary pressures. External Position and Fiscal Outlook Egypt's external position has improved significantly following the Ras El Hikma deal, which contributed to a sovereign credit rating upgrade by Fitch and S&P Global Market Intelligence in 2024. Foreign exchange reserves increased to $47.3 billion by December 2024, bolstered by a rise in remittances and tourism revenues. However, these gains have been partially offset by a nearly 60 per cent drop in Suez Canal revenues due to regional disruptions. On the fiscal front, Egypt's debt-to-GDP ratio is projected to decline from 96 per cent in FY 2024 to 85 per cent in FY 2025. Despite this progress, EBRD said debt servicing remains a major challenge, expected to account for 50-60 per cent of government expenditures in FY 2025. Fiscal consolidation efforts, particularly in International Monetary Fund (IMF)-supported countries such as Egypt, Jordan, and Morocco, are likely to continue. The EBRD report also highlights the potential impact of universal tariffs on Egypt's economy, noting that the country's exports, particularly iron rods, are more sensitive to tariff changes. Unlike commodities such as oil or gas, which exhibit lower elasticity, Egypt's export profile includes goods with higher tariff elasticity, making them more vulnerable to shifts in global trade policies. This could pose challenges to trade competitiveness, particularly if protectionist measures increase. However, despite these risks, Egypt's business and consumer confidence is expected to recover, supported by declining inflation. Attribution: Amwal Al Ghad English Download
