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S&P Global Ratings now sees our GDP growing at a 4.7% y-o-y clip in the current fiscal year, down 0.1 percentage points from its previous forecast, it said in a report. The move makes S&P the latest body to give its projections a war-time reality check. Fitch Solutions’ research arm BMI has already loweredits growth forecast for the period by 0.3 percentage points to 4.9% y-o-y, while Oxford Economics has trimmed its 2026 forecast by 0.4 percentage points to 4.5% y-o-y, and the EBRD has warned of a similar move to come.
But unlike BMI, S&P sees the coming fiscal year as when the impact of the war on growth will be really felt, with its very moderate downward revision for the current fiscal year followed by a 0.5 percentage point cut to 4.2% y-o-y for the fiscal year 2026-27, representing a 0.4 percentage point slowdown in growth between the period. In contrast, despite BMI’s larger downward revision for the current fiscal year, it reduced its forecast for the following 12-month period by only 0.2 percentage points to 5.2%, representing a 0.3 percentage point acceleration starting in the fiscal year.
Why this matters: The consensus on a V-shaped recovery may be cracking. While others, for now at least, are pricing the war as a front-loaded shock followed by an acceleration, S&P is less optimistic in the longer term. If S&P’s right, the economic impact of the war could leave its mark on Egypt for much longer than markets are currently pricing in.
Despite our physical and political distance from the conflict, “the war in the Middle East has most affected Egypt among the key EM EMEA economies” as 20% of gas flows were cut off with the closure of Israeli exports and the EGP depreciating 8% since January.
S&P’s downward growth revisions were accompanied by upward revisions to its inflation forecasts. The rating agency now expects inflation to average 1.6 percentage points for the current fiscal year at 13.7%. But again, its inflation forecast shows the war really making its mark starting in the next fiscal year, with a 5.6 percentage point increase to its forecast to 15.8%. This suggests that the delayed impact of gas flow disruptions and currency depreciation will keep input costs elevated well into 2026, squeezing margins just as growth slows.
On the currency front, S&P sees the EGP finishing the current fiscal year at EGP 55.00 against the greenback, before slipping again a further EGP 5 to EGP 60.00 by the end of the following 12-month period. Looking further ahead, the rating agency sees the currency slipping a further EGP 3 for each of the two following fiscal years.
By forecasting a steady slide to EGP 60.00 and beyond, S&P is rejecting the idea of a post-war currency stabilization. This implies a more permanent shift in the country's risk premium and a long-term increase in the cost of servicing FX-denominated debt.
