Fitch Solutions’ research unit BMI now expects the Egyptian economy to grow 5.1% in FY 2025-2026, up 0.4 percent points from its previous 4.7% projection, it said in its latest country risk report for Egypt. The decision was supported by an expected improvement in Red Sea navigation, an uptick in the services sector on the back of calming geopolitical risks, and lower borrowing costs pushing up investment.

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But its forecast for the current fiscal year is not as rosy: The Fitch research unit trimmed its growth projection by 0.5 percentage points for FY 2024-2025 and now sees Egypt’s economy growing at a 3.7% clip, down from the 4.2% forecast in September. BMI attributed the cut to weaker performance in the last quarter of the 2023-2024 fiscal year alongside the ongoing disruptions in the Red Sea that are cutting down on Suez Canal receipts.

Despite the downgrade, we’re still up on the previous fiscal year, with the report noting that the recovery of non-oil exports and increased investment will keep the country’s growth above the 2.4% mark, seen last fiscal year.

BMI’s forecast is more pessimistic than most, sitting below both the government’s 4.2%growth target for the year and the IMF’s expected 4.1%. However, the forecast remains above the World Bank’s penciled 3.5% growth.

PLUS- Fitch doesn’t expect the EGP to weaken any further against the greenback thanks to improved investor sentiment and market intervention. Projections of a weaker USD and easing geopolitical tensions, which will help Suez Canal revenues recover, will help the EGP regain some of its losses.

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