The EBRD has lowered Egypt’s GDP growth forecast for 2025 to 4.2 percent and revised fiscal estimates down to 3.6 percent, citing ongoing economic challenges. Yet, the bank forecasts a rebound in growth for 2026 at 4.7 percent due to improved investor confidence. Inflation is expected to ease, although government debt servicing costs remain high, consuming a significant portion of expenditure.
The European Bank for Reconstruction and Development (EBRD) has adjusted its economic forecast for Egypt, lowering the GDP growth estimate for 2025 to 4.2 percent, which represents a decrease of 0.3 percentage points from the previous forecast made in September. In addition, the projection for Egypt’s fiscal year ending in June 2025 has been revised down to 3.6 percent, a 0.4 percentage-point drop from earlier predictions according to the latest Regional Economic Prospects report.
Despite this downward revision, the EBRD predicts a rebound for Egypt in 2026 with an anticipated GDP growth of 4.7 percent and 4.6 percent for the fiscal year 2025/2026. This optimism is attributed to improved investor confidence and the ongoing implementation of economic reforms. The past year saw Egypt’s economy grow by 2.9 percent, also reflecting a downward revision of 0.3 percentage points from earlier estimates.
The report notes that economic activity surged during the first quarter of FY2024/2025, recovering from previous macroeconomic instabilities and currency fluctuations. Key sectors, including communications, accommodation and food services, transportation and storage (not including the Suez Canal), financial services, and manufacturing, are expected to lead the growth trajectory, with manufacturing showing signs of recovery after prior slowdowns.
Inflation is projected to continue to ease, with a reduction in prices anticipated due to base effects and stringent monetary policies, although adjustments in fuel prices may cause fluctuations. As of January, the inflation rate was recorded at 24 percent, marking the lowest level since December 2022.
The Ras El Hekma agreement has contributed positively to Egypt’s external economic standing, yet vulnerabilities remain according to the EBRD. Although the debt-to-GDP ratio is expected to drop to 85 percent in FY2024/2025 from 96 percent a year earlier, high costs associated with debt servicing continue to be a significant concern.
The EBRD estimates that between 50 and 60 percent of government spending this fiscal year will be directed toward debt payments, maintaining strong fiscal pressures despite some observed improvements.
In summary, the EBRD has lowered Egypt’s GDP growth forecasts for 2025 due to economic challenges, predicting a drop to 4.2 percent and a fiscal estimate of 3.6 percent. However, a recovery is anticipated in 2026. While inflation is projected to ease, significant debt servicing costs continue to burden the economy, consuming a large portion of governmental expenditures.
Original Source: www.egypttoday.com
