Fitch Solutions’ research unit BMI now sees the country’s GDP approaching 5% this fiscal year, marking a 0.3 percentage point increase from its latest forecast in August, Fitch Solutions’ MENA Country Risk Head Ramona Moubarak said in a webinar attended by EnterpriseAM. She cited investment recovery and a smaller drag in net exports as some of the main reasons behind the upgraded forecast.

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The growth drivers: “Lower interest rates and inflation will support increased private sector investments, particularly in the manufacturing sector, while an attractive EGP will drive new FDI inflows and keep export growth strong,” Moubarak said.

REMEMBER- The Central Bank of Egypt (CBE) has now cut rates a whole 625 bps since kicking off its easing cycle in April, most recently slashing rates 100 bps earlier this month. The continued rate cuts were prompted by a continued dip in inflation, which hit its lowest level in years last month.

Inflation outlook: BMI now expects inflation to average 14% this year, a 0.4 percentage point decrease from August’s projection, Moubarak said, adding that the recent fuel price hike will trigger a temporary uptick in inflation readings over the coming few months, yet inflation will maintain a downward trajectory. Looking ahead, BMI raised next year’s inflation forecast to 10.5%, from the 10% pencilled in in August.

ICYMI- The country raised fuel prices for the second time this year earlier this month, as part of efforts to phase out energy subsidies and bring domestic prices in line with international energy markets.

Monetary policy outlook: Despite expected inflationary pressures resulting from the fuel price hikes, BMI sees the CBE slashing the interest rate by an additional 100 bps in December, dragging the lending rate to 21%. This forecast is supported by the “massive decline in inflation levels, the strong currency and the global monetary policy easing,” Moubarak said. Looking ahead, all these factors, along with the need to boost private investment and curb debt service costs, will prompt the CBE to cut rates by a total of 975 bps over 2026, according to Moubarak.

The CBE could take its foot off the gas to protect our carry trade as investors continue to seek high returns, Moubarak said, noting that “the priority for authorities is to continue to support the currency and to keep portfolio investments flowing and capital inflows strong.”

A closer look at the EGP / USD exchange rate: The EGP has recently strengthened to trade below EGP 48 against the greenback, exceeding BMI’s expectations. The ceasefire further boosted sentiment and raised optimism regarding the potential return of Suez Canal traffic and higher tourism inflows, Moubarak said.

The EGP could face some pressures before the year is out due to capital outflows — investors tend to cashout their profits and withdraw capital in December — especially seeing that we have some USD 8 bn in short-term debt due to mature in December. Early next year, BMI expects the EGP to regain some of its losses and remain stable throughout the year, bearing any external shocks.

THE REGIONAL OUTLOOK-

Regional growth is expected to accelerate for the second year running to hit 3.6% in 2026, up from the 3% projected for 2025, supported by stronger growth forecasts across most countries in the region, Moubarak said. Growth in North Africa is projected to come in at 4.1% next year, up from 4% in 2025, driven by faster growth in Egypt.

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