The Central Bank of Egypt (CBE) has warned that inflation is expected to accelerate while economic growth slows, as the ongoing Iran–U.S. conflict continues to weigh on global markets and spill over into the Egyptian economy.
In its latest monetary policy report, the bank said the geopolitical escalation has negatively affected global economic expectations, increasing pressure on commodity and energy prices and adding uncertainty to emerging markets, including Egypt.
CBE projected that annual inflation could rise to an average of around 17% in 2026, up from earlier estimates of 11%, driven primarily by higher global food and energy costs linked to the conflict.
This comes despite a recent moderation in price pressures, with urban inflation easing slightly to 14.9% in April, down from 15.2% in March, according to official data from Egypt’s statistical authority.
On a monthly basis, inflation slowed to 1.1% in April compared with 3.2% in March, suggesting a gradual easing of short-term price pressures even as overall levels remain elevated.
The central bank has kept its key interest rates unchanged, maintaining deposit rates at 19%, lending rates at 20%, and the main operation rate at 19.5%, citing persistent upside risks to inflation both domestically and globally.
On the growth side, the bank expects economic expansion to slow from the first half of 2026 through the remainder of the year.
It revised down its forecast for real GDP growth to 4.9% in the current fiscal year and 4.8% in the next, compared with previous projections of 5.1% and 5.5%.
The institution attributed the downgrade to external shocks, tighter global financial conditions, and disruptions stemming from regional instability.
The report said the Iran–U.S. conflict has significantly disrupted global economic sentiment, with spillover effects reaching Egypt through higher import costs and pressure on external balances.
However, the central bank noted that the Egyptian economy has shown resilience in recent months, supported by improving tourism, construction activity, and a partial recovery in key logistics revenues.
Earlier data indicated a stronger-than-expected GDP performance of 5% in the first quarter of 2026, alongside rising foreign reserves and a strengthening currency at certain points, signaling mixed but relatively stable macroeconomic conditions despite ongoing external risks.
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