CBE Warns Regional Conflict Could Slow Economic Growth

Egypt’s economy is showing early signs of slowing momentum as regional geopolitical tensions begin to weigh on domestic activity, according to fresh assessments released by the Central Bank of Egypt (CBE) on Friday.

In a statement accompanying its latest monetary policy decision, the central bank said real GDP growth eased slightly to 5.0% in the first quarter of 2026, down from 5.3% recorded in the final quarter of 2025. Policymakers warned that growth is likely to soften further during the second quarter as the economic repercussions of the ongoing regional conflict continue to unfold.

Despite the anticipated moderation, the central bank maintained its projection for annual real GDP growth at around 5.0% for the 2025/2026 fiscal year, signaling resilience in key sectors of the economy even as external risks intensify.

The bank noted that economic output remains below full productive capacity, with the output gap expected to close gradually by the first half of 2027. This, officials said, should help contain demand-driven inflationary pressures in the near term, particularly under the current monetary tightening framework.

“The current trajectory of the output gap suggests that inflationary pressures stemming from demand will remain limited over the short term,” the statement said, underscoring the central bank’s confidence in the effectiveness of its monetary stance.

On the labor front, Egypt’s unemployment rate improved modestly to 6.0% in the first quarter of 2026, compared with 6.2% in the previous quarter, indicating continued resilience in the job market despite broader economic uncertainty.

The central bank’s remarks come at a time when economies across the Middle East are grappling with heightened volatility linked to regional instability, disrupted trade flows, and investor caution. Analysts say Egypt’s ability to sustain growth near the 5% mark will depend heavily on tourism revenues, foreign investment inflows, and the stability of global energy and commodity markets in the months ahead.