Macrostructural reforms power 3Q growth: The economy expanded by 4.8% in the 3Q FY 2024-2025, marking the highest growth rate in three years, thanks to ongoing macrostructural reforms, Deutsche Bank said in a research note seen by EnterpriseAM. Most of the figures published in the note matched the government’s data released in late June.

The growth momentum is primarily fueled by the continued recovery of the non-oil sector, which saw a 16% y-o-y growth, a sharp rebound from a 4% contraction recorded in the same period of the previous fiscal year. The sector contributed 1.9 percentage points to the overall GDP. Strong expansion was also seen across other sectors, including telecoms (14.7% from 13.9%) and tourism (23%, from 7.1%), with both contributing a cumulative of 1 percentage point to the overall GDP.

Hydrocarbon + Suez Canal poised for recovery: Despite continued underperformance, with the hydrocarbon sector falling 10.4% y-o-y and the Suez Canal revenues dropping 23% y-o-y during the quarter, Deutsche Bank expects a gradual improvement in their contributions. This anticipated rebound stems from two key factors: renewed investments in the extractive sector — following the government’s efforts to settle the Egyptian General Petroleum Corporation’s debt to foreign oil companies — and a potential return of Red Sea shipping activity to pre-disruption levels, the German investment bank noted.

On the back of this stronger-than-expected growth, Deutsche Bank has slightly revised up its growth forecast for the fiscal year 2024-2025 to 4.3%. This projection is slightly higher than the government’s 4.0% target, though the government itself also expects the growth to exceed this goal.

Growth outlook brightens for FY 2025-2026: GDP growth is forecast to expand 4.8% this fiscal year, on the back of a continued improvement in domestic demand, as the CBE moves forward with its monetary easing cycle amid declining inflation, the bank noted. This is slightly above the IMF’s projection of 4.1%.

Inflation outlook: Deutsche Bank sees headline inflation in Egypt averaging 15-16% in 2025, before declining to 10% in 2026. “In terms of the remaining upward pressures, we expect 3Q to be mainly about the interactive impact of the fiscal and monetary policy measures implemented on inflation,” the bank wrote.

However, 4Q 2025 is expected to bring further increases in fuel prices around the completion ofthe fifth and sixth reviews of our USD 8 bn IMF loan program, as the government moves to align local fuel prices with global ones, the investment bank said. Additionally, a 12% increase in tobacco prices is also expected in November.

This is relatively close to the IMF forecast, as it sees inflation reaching 15.3% on average during FY 2025-2026, before cooling down to 10.7% on average in the upcoming fiscal year. Annual headline urban inflation fell to 14.9% in June, from 16.8% in May, ending an upward trend that extended over three consecutive months.

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