The International Monetary Fund (IMF) now sees Egypt’s real GDP growing by 4.5% in the 2025-2026 fiscal year, a 0.4 percentage points increase from its latest forecast in July, according to the fund’s latest Regional Economic Outlook (pdf).

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The IMF’s upward revision aligns with the Madbouly government forecast of 4.5% growth during the current fiscal year and is more optimistic than the World Bank’s 4.3% forecast and the European Bank of Reconstruction and Development’s 4.4% forecast.

Driving the growth: The upgrade was supported by an uptick in remittance inflows from Egyptians abroad and an increase in tourism revenues, both of which are helping improve our current account balance, the IMF said.

Egypt’s external position is projected to strengthen gradually in the medium term as tourism inflows gain more momentum and exports are expected to see a boost as regional trade normalizes, the fund says.

But elevated borrowing costs remain a key vulnerability for Egypt, with the banking system holding large shares of sovereign bonds on its balance sheet, the IMF warns. However, public debt is expected to “stabilize at, or modestly decline from, relatively high levels.” In the new public debt strategy, the Finance Ministry aims to bring public debt down to below 75% of GDP within three years, compared to 85% in the last fiscal year, while cutting debt servicing costs to 7% of GDP and extending debt maturity to five years.

Inflation outlook remains positive: The IMF sees inflation slowing to 11.8% next year, which is a significant decline from the rates observed in the previous years, Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said in a press briefing. This downward path will be buoyed by the “waning effects of past currency depreciation and energy price hikes,” according to the report. In July, the IMF projected inflation reaching 15.3% on average during FY 2025-26, before cooling down to 10.7% on average in the upcoming fiscal year.

REMEMBER- Annual headline urban inflation fell by 0.3 percentage points in September to end the month at 11.7%. The fall marked the fourth consecutive month of easing price inflation and the lowest annual figure since March 2022.

OTHER KEY TAKEAWAYS-

Discussion between the Madbouly government and the IMF regarding the combined fifthand sixth reviews of our USD 8 bn loan program are expected to conclude in Q4 2025, Azour told Reuters. It is yet to be determined when the anticipated IMF mission will land in Egypt for the reviews.

Recent consultations held between the two sides touched on several areas — including improving the business environment and giving more space to the private sector in the economy to support growth and create jobs, according to Azour.

It is not necessary to extend the current program, Azour said.

The IMF is currently working on two main pillars. The first is accelerating the role of the private sector in the economy and protecting Egypt from any disturbances. The other is protecting the social system by “transforming parts of the public expenditure to be more targeted and provide more support for the most vulnerable categories through targeted policies, and by creating a bigger space of the public expenditure to support the most vulnerable,” Azour added.

“We encourage the authorities to accelerate the implementation of two important milestones — divestment and increasing the level of clarity under some of the state-owned enterprises,” Azour told Reuters.

The Gaza peace agreement will have a positive impact on the Egyptian economy, which has managed to adapt to the shocks.

THE REGIONAL OUTLOOK-

The MENA region’s outlook was revised upward by 0.1 percentage points from July’s forecast to 3.3% in 2025, while the projection for next year’s growth was also revised upward by 0.3 percentage points to 3.7%. The fund now expects the region’s GDP to remain broadly steady over the medium term.

“Economic activity in the Middle East and North Africa has shown remarkable resilience, despite persistent global uncertainty and heightened geopolitical tensions. The region has largely avoided direct fallout from higher US tariffs and global trade restrictions. And while recent tensions have raised concern, their impact has been limited and short-lived,” Azour said in a press briefing (pdf).

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