EBRD slashes its forecast for Egypt’s GDP growth: The European Bank for Reconstruction and Development (EBRD) cut its forecast for Egypt’s real GDP growth for 2025 and 2026 by 0.2 percentage points from its February forecast, the bank wrote in its latest Regional Economic Prospects report (pdf). The multilateral lender now sees the economy growing 4.0% this year and 4.5% in 2026 — the figures mark an improvement from last year, when the economy grew 3.1%.

What about the fiscal year? The EBRD now sees the economy growing 3.8% in the current fiscal year — up 0.2 percentage points from previous predictions — and 4.4% in the fiscal year 2025-26 — down 0.2 percentage points from previous forecasts.

Driving the growth: Egypt’s GDP growth rose to 3.9% y-o-y in the first half of the fiscal year 2024-25, compared with 2.4% in the same period last fiscal year, which the multilateral lender said was driven by “expansion in manufacturing, transportation and wholesale and retail trade.”

How this prediction compares to others: The International Monetary Fund recently upgraded Egypt’s growth forecast for the current FY to 3.8%. The forecast was later echoed by analysts and economists polled by Reuters, who trimmed the country’s growth forecast for the current FY to 3.8%. As for the coming FY, the IMF sees the economy growing 4.3% y-o-y, while the Reuters poll pencils in 4.6% growth for the FY 25-26.

Inflation is expected to continue falling throughout the year, reflecting the central bank’s tight monetary policy stance, the bank said. “ Rising fuel prices, as part of the government’s commitment to reach cost recovery by the end of the year under the IMF-supported program, may put upwards pressure on consumer prices,” the report reads.

But some think the IMF may agree to slow the pace of energy reform, including Al Ahly Pharos Senior Economist Esraa Ahmed, who previously told us that getting fuel prices up to cost recovery levels by end of the year would cause “drastic and rapid movements” in inflation.

Inflation aside, Egypt also faces high fiscal vulnerabilities compared to other EBRD countries: EBRD economies face “significant fiscal vulnerabilities” that include high government interest payments as a percentage of GDP or a high public debt to GDP ratio, which the bank said is expected to be highest in Egypt. The country faces interest payments of 13% of GDP, according to the report.

The growth outlook is dependent on a number of factors: For EBRD, Egypt’s growth outlook will largely depend on its implementation of structural reforms — especially ones that pertain to the state’s presence in the economy, as well as its “reduction of debt levels and associated service costs.” Meanwhile, the lender sees risks to the country’s overall outlook, which it says is driven by international trade policy uncertainty as well as Egypt’s “continued reliance on portfolio investment from abroad as a source of external financing,” the bank said.

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