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US President Donald Trump’s tariff plan, coupled with lingering geopolitical tensions in the region, has contributed to a feeling of uncertainty over Egypt’s economic prospects, Oxford Economics wrote in a report seen by EnterpriseAM. The report assesses the impact of recent global developments on Egypt’s economy on the short and long terms and their implications on Egypt’s macroeconomic indicators for the year.
Trump’s tariffs could (indirectly) slow down Egypt’s economic growth. “Egypt escaped relatively unscathed, with only a 10% baseline tariff on goods exported to the US. However, Cairo should still feel the effect of harsher tariffs on other countries as it is expected to result in lower global economic growth,” the report reads. This will also push down investment from the private sector, which the report describes as “particularly concerning for Egypt given the government’s divestment drive.”
The global trade war and fears of lower global economic growth pushed Oxford Economics to cut its growth forecast for Egypt by 0.1 percentage point. Oxford Economics now sees real GDP growth coming in at 4.1% in 2025 — a 1.0 percentage point jump from 2024 — before accelerating further to 4.7% over the next two years.
Egypt should do comparatively better than much of the globe, as “the effect of the trade tariffs on the Egyptian economy will likely pale in comparison to the anticipated slowdown in global economic growth and a subdued investment climate,” the report reads. However, the impact of the trade war — as well as the spillover effects from regional tensions — will put a fiscal squeeze on the government as Suez Canal revenues continue to remain well below normal levels.
Oxford Economics is also ringing the bell for more budget cuts, describing the 18% rise in the public sector wage bill in the draft budget for the next fiscal year as “concerning,” given that inflation is forecast at 12% y-o-y over the same period. Despite the criticism, the advisory firm described the proposed budget as “sensible” and said that “the 18% increase in fiscal expenditure is not that significant.”
Forecasts of a significant downturn in inflation were also pushed back, with inflation expected to hover around 13.5% until the last quarter of the year on the back of a strengthening USD. Despite the expectation of sticky inflation over the months to come, the firm expects the central bank to cut rates by 300 bps this Thursday — putting their interest rate forecast at the upper-end of predictions we’ve heard from analysts.
