The Central Bank of Egypt (CBE) is out with its latest Monetary Policy Report (pdf), in which it provides a deep dive into Egypt’s economic trajectory and its position within global economic developments while offering its insights and predictions on the country’s economic performance ahead. Below are some of the key takeaways from the 1Q 2025 report.

REMEMBER- The CBE cut interest rates by 225 bps in its second meeting of the year in April, in a move that marked the Monetary Policy Committee’s first change to policy rates since March 2024. This move provided context for the bank’s predictions in the report, tying its decision to some of the key indicators of Egypt’s economy over the last quarter. And of course, the report comes just ahead of the central bank meeting once again tomorrow to decide whether to continue or hit pause on its monetary easing cycle.

The bank expects inflation to continue declining for the remainder of this year and through 2026 — albeit at a slower pace than what we saw in 1Q 2025, with the CBE forecasting the inflation level to reach its targeted average of 7% ±2 percentage points by 4Q 2026. This is attributed to the “implemented and planned fiscal consolidation measures across the forecast horizon, in addition to the relative persistence of non-food inflation.”

Driving the decline in inflation is a combination of “easing supply-chain bottlenecks, global trade flow normalization, and the impact of tight global monetary policy which effectively curbed aggregate demand,” the bank wrote.

The inflation outlook faces some risks: The CBE stated that its inflation outlook remains subject to risks emanating from “higher-than-expected passthrough of fiscal measures” as well as global risks that include “the resurgence of trade protectionism, rising geopolitical tensions, and widening global imbalances.”

ICYMI- Annual headline urban inflation rose for the second month running in April to hit 13.9%, marking a 0.3 percentage point increase from the 13.6% recorded in March. On a monthly basis, inflation eased by 0.3 percentage points to 1.3%. Despite the rise, headline inflation is a far cry from the 24.0% recorded in January, with the figure remaining relatively stable since February’s 11.2 percentage point drop.

Growth rates in 2025 so far have been positive, with economic activity in 1Q 2025 expected to have grown at a faster pace from 4Q 2024, the CBE stated. This comes on the back of expanding growth in EGP-denominated loans to the private sector since Q3 2024, which came following six consecutive quarters of negative real growth rates in local currency loans, the CBE added.

And real GDP growth is expected to continue to climb, forecast at 4.3% in the current fiscal year and 4.8% in the following fiscal year, up from 2.4% in FY 2023-24. This would mark a gradual recovery from the “subdued spell of economic activity during the past two fiscal years,” the bank said. The recovery in growth was largely attributed to increased contributions of real net exports and gross domestic investments — both of which were aided by the exchange rate unification that came with the CBE’s decision to float the EGP back in March 2024.

“The expected recovery is mainly due to the rebound of manufacturing economic activity as shown by leading indicators, reflecting the positive impact of the unification of the foreign exchange markets on the ability of firms to import requisite raw materials and intermediate goods for the production processes,” the CBE wrote. The bank added that “growth will be supported by an expected improvement in the contribution of the extractions sector, as various successful onshore and offshore discoveries are projected to revive Egypt’s production of crude oil and natural gas.”

Egypt’s ability to finance its external funding needs is also in good shape, with the narrowing current account deficit helping drive a surplus in our balance of payments, which reflected Egypt’s ability to finance its external funding needs, according to the CBE. Surging remittances helped Egypt finance its external funding needs, along with the narrowing of the net investment income deficit, which helped offset the effects of a widening trade deficit and a declining services surplus.

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