The EBRD has revised Egypt’s GDP growth forecast for 2025 down to 4.2 percent, a decline from previous estimates. Projections for the fiscal year ending June 2025 have also been revised to 3.6 percent. The bank anticipates a recovery in 2026, driven by key economic sectors and reduced inflation rates. However, Egypt continues to face high debt-servicing costs and economic vulnerabilities.
The European Bank for Reconstruction and Development (EBRD) has revised its economic predictions for Egypt, decreasing its GDP growth forecast for 2025 to 4.2 percent, which is a reduction of 0.3 percentage points from the previous estimate made in September. The report, released on March 2, 2025, also indicates a lowered projection for the fiscal year ending in June 2025, now at 3.6 percent, a decrease of 0.4 percentage points from earlier forecasts.
Despite this downgrade, the EBRD projects a rebound for Egypt’s economy in 2026, estimating GDP growth at 4.7 percent and 4.6 percent for the fiscal year 2025/2026, citing factors such as improved investor confidence and ongoing economic reforms. Previous fiscal estimates suggest growth for the past year reached 2.9 percent, adjusted downward by 0.3 percentage points.
The initial quarter of FY2024/2025 has demonstrated an uptick in economic activity following previous macroeconomic disruptions and fluctuations in currency values. Driving the expected growth are sectors such as communications, accommodation and food services, transportation (excluding the Suez Canal), financial services, and manufacturing, which is beginning to recover from last year’s downturn.
The EBRD anticipates a continuing decline in inflation rates, projecting further price reductions due to base effects and stringent monetary policies, despite potential fuel price adjustments. Notably, the inflation rate observed in January was recorded at 24 percent, marking the lowest level since December 2022.
While the Ras El Hekma agreement has bolstered Egypt’s external economic position, significant vulnerabilities remain, as highlighted by the EBRD. The debt-to-GDP ratio is expected to fall to 85 percent in FY2024/2025 from 96 percent in the prior year; nevertheless, elevated debt-servicing costs will persist. It is estimated that between 50 to 60 percent of government expenditure in the current fiscal year will be allocated to debt repayments, which sustains considerable fiscal pressures despite some enhancements.
In summary, the EBRD has lowered Egypt’s GDP growth forecast for 2025 while anticipating a rebound in 2026, attributed to improved investor sentiment and economic reforms. Economic activity is showing signs of recovery, with inflation rates decreasing. However, significant challenges remain, including high debt-servicing costs and persistent vulnerabilities within the economy.
Original Source: www.egypttoday.com
