The EBRD has revised Egypt’s 2025 GDP growth forecast to 4.2%, a decrease from prior estimates. For FY2025, the projection is now 3.6%. Despite these downgrades, a recovery is expected in 2026 with 4.7% growth. Economic vulnerabilities persist, and inflation is expected to ease, although high debt-servicing costs will challenge government spending.
On March 2, 2025, the European Bank for Reconstruction and Development (EBRD) revised its economic forecast for Egypt, lowering the GDP growth projection for 2025 to 4.2 percent, a decrease of 0.3 percentage points from previous estimates made in September. This adjustment also affected projections for the fiscal year ending in June 2025, which was revised down to 3.6 percent, marking a decline of 0.4 percentage points.
Despite this downward revision, the EBRD remains optimistic about a recovery in 2026, projecting GDP growth at 4.7 percent and 4.6 percent for the fiscal year 2025/2026. These expectations are based on anticipated improvements in investor confidence and the continued implementation of economic reforms.
The previous year saw Egyptian economic growth at an estimated rate of 2.9 percent, also lower than prior forecasts by 0.3 percentage points. The latest report indicates increased economic activity during the first quarter of FY2024/2025, following a period marked by macroeconomic instability and currency fluctuations.
Key sectors such as communications, accommodation and food services, transportation and storage (excluding the Suez Canal), financial services, and manufacturing are expected to drive growth forward, showing signs of recovery after the slowdown of the past year.
The EBRD projects inflation to decrease further due to base effects and strict monetary policies, although potential adjustments in fuel prices may influence this trend. As of January, the inflation rate stood at 24 percent, the lowest since December 2022.
The Ras El Hekma agreement has bolstered Egypt’s external financial position, yet economic vulnerabilities remain, as cautioned by the EBRD. Although the debt-to-GDP ratio is projected to decrease to 85 percent in FY2024/2025 from 96 percent the previous year, Egypt continues to face considerable debt-servicing costs, with estimates suggesting that 50 to 60 percent of government spending this fiscal year will be consumed by debt payments, sustaining fiscal pressures despite some signs of improvement.
In summary, the EBRD has adjusted Egypt’s GDP growth forecast for 2025 downwards while projecting a rebound in 2026 owing to reforms and improved investor confidence. Economic activity is recovering, especially in key sectors, yet challenges remain regarding inflation and high debt levels, which will continue to put pressure on fiscal budgets. The situation remains complex, but there are grounds for cautious optimism moving forward.
Original Source: www.egypttoday.com
