EBRD trims Egypt’s 2025 growth forecast

The European Bank for Reconstruction and Development (EBRD) has revised down Egypt’s economic growth forecast for 2025, now projecting a 4.2% expansion, 0.3 percentage points lower than its previous estimate in September. For the fiscal year ending in June 2025, the forecast has also been reduced by 0.4 percentage points to 3.6%, as outlined in the bank’s latest Regional Economic Prospects report.

Despite the downward revision, the EBRD predicts a stronger economic outlook for 2026. It expects Egypt’s GDP growth to accelerate to 4.7% next year and reach 4.6% for the fiscal year 2025-2026, driven by improved investor confidence and the impact of ongoing reforms.

Preliminary estimates suggest Egypt’s economy grew by 2.9% last year, marking a 0.3 percentage-point reduction from previous projections. However, economic activity has gained momentum in the first quarter of FY 2024-2025 following a period of macroeconomic instability and currency fluctuations. Growth this fiscal year is expected to be fueled by key sectors such as communications, hospitality, transportation, financial services, and manufacturing, which is showing signs of recovery after last year’s decline.

Inflation is expected to ease further, with January’s rate dropping to 24%, the lowest since December 2022. The report attributes this trend to base effects and strict monetary policy, though adjustments to fuel prices may still be necessary. Meanwhile, Egypt’s external position has improved, bolstered by the Ras El Hekma agreement. However, underlying risks persist, according to the EBRD.

While Egypt’s debt-to-GDP ratio is forecasted to decline from 96% to 85% in FY 2024-2025, the burden of debt servicing remains a major challenge. Government debt payments are projected to consume 50-60% of public spending this fiscal year, posing a significant fiscal constraint.

Economic growth in the Southern and Eastern Mediterranean (SEMED) region stagnated in 2024 due to geopolitical instability and economic contraction in Lebanon. However, a late-year recovery has spurred optimism, with the region’s growth expected to reach 3.7% in 2025 and 4.1% in 2026. Nonetheless, risks related to geopolitical tensions and climate shocks remain significant.