EBRD Lowers Egypt’s 2025 GDP Growth Forecast, Anticipates Recovery in 2026
The EBRD has reduced Egypt’s 2025 GDP growth forecast to 4.2%, reflecting economic challenges, while projecting a recovery to 4.7% in 2026. Key sectors are showing growth amidst easing inflation. Economic vulnerabilities persist, with significant government spending directed towards debt repayments.
On March 2, 2025, the European Bank for Reconstruction and Development (EBRD) announced a downward revision of Egypt’s GDP growth forecast for 2025, now estimating a growth rate of 4.2 percent, which represents a decrease of 0.3 percentage points from their previous September outlook. Furthermore, the projection for Egypt’s fiscal year ending in June 2025 has been lowered to 3.6 percent, reflecting a 0.4 percentage-point reduction from earlier predictions, as detailed in the latest Regional Economic Prospects report.
Despite this downgrade, the EBRD is optimistic about a rebound in 2026, forecasting GDP growth of 4.7 percent and 4.6 percent for the fiscal year 2025/2026. This anticipated recovery is attributed to enhanced investor confidence and ongoing economic reforms within the country. Additionally, the EBRD reports that Egypt’s economy grew by 2.9 percent last year, which is also a downward revision of 0.3 percentage points from September’s forecast.
The report indicates a resurgence in economic activity during the first quarter of FY2024/2025 following a challenging period marked by macroeconomic instability and currency fluctuations. Key sectors driving this growth include communications, accommodation and food services, transportation and storage (excluding the Suez Canal), financial services, and manufacturing, which is showing signs of recovery after experiencing a slowdown last year.
The EBRD further anticipates a continued easing of inflation, predicting that prices may decrease further due to base effects and stringent monetary policies, notwithstanding potential adjustments in fuel prices. As of January, inflation stood at 24 percent, the lowest level since December 2022.
Moreover, the EBRD noted the positive impact of the Ras El Hekma agreement on Egypt’s external economic position, though it cautioned that vulnerabilities remain. The debt-to-GDP ratio is expected to decline to 85 percent in FY2024/2025 from 96 percent the previous year; however, high debt-servicing expenses continue to pose fiscal challenges. It is estimated that 50 to 60 percent of government expenditure this fiscal year will be allocated to debt repayments, keeping fiscal pressures high despite some improvements.
In summary, the EBRD has revised Egypt’s 2025 GDP growth forecast downward, projecting 4.2 percent growth due to various economic challenges. A recovery is expected in 2026, with projections of 4.7 percent growth, grounded in improved investor confidence. Inflation appears to be easing, although significant debt remains a pressing concern for the government, highlighting the need for ongoing economic reforms.
Original Source: www.egypttoday.com
