Egypt is a “triple deficit” economy, “combining fiscal, current account, and energy deficits,” which leaves it highly exposed to the fallout from the war in the region, according to the latest Allianz Economic Outlook 2026-27 (pdf). Allianz classifies the country’s vulnerability to physical supply disruptions as high and its exposure to rising energy price movements as medium, along with a negative FX outlook and high risk of fiscal slippage through the year.

“External pressure is compounded by a distinct and underappreciated risk: their dependence on Gulf remittance,” according to the report. With remittances accounting for 5.6% of GDP, the prospect of a longer war and the resulting impact on economic activity in the Gulf could “reduce remittance flows precisely when import bills are rising, creating a potential double squeeze on external accounts that could widen financing gaps and pressure foreign reserves.”

Egypt and Jordan are also exposed given their reliance on tourism for FX inflows, as the countries’ “geographical proximity to the conflict is already weighing on arrival numbers.”

The country will be hard hit if the Hormuz Strait is closed for more than three months, with Egypt and other countries with triple deficit economies set to face “higher import bills widen external positions while governments simultaneously face rising subsidy costs and financing pressures, forcing procyclical tightening.”

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