After a welcome flurry of growth forecast upgrades at the start of the year, the country is facing a wartime reality check. Fitch Solutions’ research arm BMI now sees GDP growth ending the current fiscal year at 4.9% y-o-y, down 0.3 percentage points from its previous forecast, it said in a recent report laying out its baseline assumption that the war will last only four weeks. Oxford Economics likewise downgraded its 2026 forecast 0.4 percentage points to 4.5% y-o-y in a note seen by EnterpriseAM. The downgrades come as the European Bank of Reconstruction and Development has recently warned its growth forecast for Egypt and other affected countries is “likely to be revised down by up to 0.4 percentage points” in its June update if energy prices were to remain elevated.”

BMI also revised down its growth projections for the coming fiscal year by 0.2 percentage points to 5.2%, reflecting a weaker starting point and a lack of expectations of an immediate, speedy recovery.

“Egypt is particularly exposed to the ongoing turmoil in the Middle East,” Oxford Economics said in its explanation for the downgrade. Both BMI and Oxford Economics point to Egypt’s reliance on energy imports, reduced Suez Canal transit volumes, and geographic vulnerability to trade disruptions behind their assessments.

Consumers — and not just the state — will have to tighten their belts, according to BMI, which sees household consumption as inflation averages at 13.0% for 2026, up from a previous forecast average of 11.7%. In addition to price hikes from the government for fuel, transport, and other utilities and commodities, BMI sees a depreciating EGP and higher freight rates also adding to consumer prices.

While imports will become more expensive, exports are expected to fall, with a projected 0.1 percentage point fall in net exports on the back of strained Suez Canal traffic and decreasing tourism revenues, according to BMI.

Real investment growth is likewise expected to fall on the back of “higher input costs facing businesses, alongside some reallocation of public spending away from capital expenditure towards social support and essential imports,” according to Fitch’s research unit. Because of this and an expected fall in FDI inflows — especially from Gulf-led projects — BMI now sees real investment growth for the year coming in at 5.8% y-o-y, down 0.2 percentage points from its previous outlook.

But the long-term view isn’t as gloomy as on first impressions, with both of BMI’s figures remaining above Egypt’s recent historical averages and still marking the strongest expansions since the fiscal year 2021-22.

The elephant in the room remains that the war will very likely be more prolonged than hoped, with BMI signalling a further 0.4 percentage point cut to its outlook to 4.5% y-o-y if the war lasts an additional four weeks.

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