Capital Economics expects GDP growth to more than double on the year before, with the research and consultancy firm pencilling in a 2.6 percentage point jump from the fiscal year before to 5.0% for FY 2024-25, Capital Economics’ James Swanston said in a research note. GDP growth is seen continuing to pick up again in the following fiscal year — albeit with a much less dramatic increase — to 5.3% for FY 2025-26.

The firm’s forecasts lie well above the consensus from other institutions and analysts, which Swanston said is down to recent developments. The IMF and World Bank this week scaled down their forecasts for the current fiscal, with the World Bank cutting its last forecast 0.7 percentage points to 3.5%, while the IMF winded down its growth expectations 0.5 percentage points to 3.6%.

The ceasefire in Gaza changes the outlook significantly, with the Houthis’ subsequent pledge to reduce attacks in the Red Sea potentially setting the stage to “bolster activity through the Suez Canal and, in turn, Egypt’s trade and logistics sectors,” Swanston argued. The calming of geopolitical tensions in the region could also aid in strengthening the country’s tourism sector as security fears ease, he added.

Last year may have also ended on a stronger note than many had assumed, with credit growth being a key factor in a better-than-expected performance for Egypt’s economy near the end of the year. “Improved confidence in the economic outlook has caused a jump in company registrations, largely in services,” while Capital Economics’ measure of real-FX-adjusted bank lending to the non-government sector grew by 2.9% y-o-y in October and manufacturing output was up 11% from its 2023 low point.

There’s also some upsides to a weakening EGP, as Swanston pointed to it improving “Egypt’s external competitiveness.” Swanston added that there are additional signs from the PMI survey that this is “supporting stronger external demand.”

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