Egypt's economy is expected to expand by 3.8 per cent in the 2024/25 fiscal year, up from an estimated 2.4 per cent in the previous year, driven by a rebound in private consumption and investment, the World Bank said in its latest Global Economic Prospects report released Wednesday. Growth is forecast to accelerate to 4.2 per cent in FY2025/26 and 4.6 per cent in FY2026/27 as monetary conditions ease and manufacturing gradually recovers. The outlook is supported by a major investment deal with the United Arab Emirates and improving investor sentiment, the report said. Despite the projected recovery, Egypt's fiscal deficit is expected to widen in FY2024/25 due to rising interest payments and a drop in non-tax revenues following a one-off boost from the UAE investment inflows. The deficit is seen narrowing slightly in the following year as subsidy reforms and stronger tax collection take effect. On the external front, the current account deficit is expected to narrow in FY2025/26, helped by lower energy import costs, steady remittance flows, and a resilient tourism sector. The non-oil trade deficit is also projected to shrink as the impact of clearing import backlogs from FY2024/25 fades. Inflation has been moderating, particularly in food prices, creating room for interest rate cuts aimed at stimulating private sector activity. However, the World Bank warned that poverty remains high due to the lingering impact of food inflation, though it is expected to decline gradually as per capita income rises and price pressures ease through FY2026/27. Foreign reserves have been strengthening, buoyed by the UAE investment package, helping to reduce external vulnerabilities. Industrial production showed signs of recovery in early 2025 amid declining political tensions and improved macroeconomic stability. Still, Suez Canal revenues remain subdued due to regional instability and global shipping disruptions. The report also flagged persistent structural challenges, including a widening employment gap as job creation fails to keep pace with the growing working-age population, underscoring the need for comprehensive labour market reforms. Attribution: Amwal Al Ghad English Subediting: Nada Ali Subediting: Y.Yasser Download
