World Bank revises downward our growth outlook for FY 2024-2025: The international lender sees the Egyptian economy growing at a 3.5% clip during the fiscal year 2024-2025, trimming its outlook 0.7 percentage points from the 4.2% forecasted in June, the World Bank said in its semi-annual MENA economic update — Growth in the Middle East and North Africa (pdf).

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To blame: The lender sees Suez Canal revenues falling to USD 4.8 bn this fiscal year, almost half the USD 8.8 bn recorded during the fiscal year 2022-2023 and down 27% from the USD 6.6 bn recorded during FY 2023-2024. This comes as escalating risks in the Red Sea continue to drive shipping companies away from the canal. Alongside this, “the uncertainty of the conflict looms large over portfolio investments, heightening investors’ apprehension across the region.”

That’s the best-case scenario: The lender cautioned that its forecast is made “under the assumption that the conflict will not worsen,” explaining that should the conflict escalate further, it could lead to “negative spillovers” that could very much affect growth — further escalations will impact business and consumer confidence, tourism, outflows, and financial conditions.

A little less optimistic than the government’s forecast: The Madbouly government sees theeconomy growing at a 4.0% clip this fiscal year

All in all, we’re growing: Despite the downward revision, the economy is still expected to grow from last fiscal year’s 2.5% growth estimate by the lender and the 2.4% figure provided by the government.

Inflation is on a downward trajectory: While deemed the highest in the region, inflation in Egypt “has been on a declining trend.” The report attributed this to the CBE’s decision to float the EGP, unify the exchange rate against the USD, and hike rates in March — a policy mainly aimed to address the persistent inflationary pressures, according to the report.

Remember: Annual headline urban inflation ticked up for a second month in September, rising 0.2 percentage points from the month before to 26.4%. Some see inflation rising a third consecutive month in October as recent price hikes feed in. However, the outlook for the rest of 4Q is more positive and even more optimistic walking into 2025.

REGIONALLY- The lender now sees the MENA region growing 2.2% this year, down from the 2.8% forecasted over the summer but up from the 1.8% recorded in 2023. “Over the past year, MENA’s 2024 real GDP growth forecasts have been substantially downgraded, with the largest

downward revisions among fragile and conflict-affected situations,” according to the report. The region is expected to grow 3.8% next year — down from an earlier forecast of 4.2%.

The worry: “Economic uncertainty in MENA is currently twice the average of other emerging markets and developing economies worldwide,” the report writes, saying its estimate is based on its measure of “the dispersion of views amongst private sector forecasters.”

What to watch for next: The report is out ahead of the kickoff next week of the World Bank andIMF Annual Meetings in Washington, DC. The meetings run Monday, 21 October through Saturday, 26 October, with the main events taking place 22-25 October.

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