EBRD Cuts Growth Forecast for Egypt to 4.2% in 2025

The European Bank for Reconstruction and Development (EBRD) has cut its growth forecast for Egypt in 2025 to 4.2%, down 0.3% from its previous estimate in September, according to its latest regional economic outlook.

The bank expects GDP growth to accelerate to 4.7% in 2026 as investor confidence strengthens and reforms gain momentum.

According to its preliminary estimates, the bank expects Egypt’s economy to grow by 2.9% last year, down 0.3% from its September forecast.

The EBRD said Egypt’s economic recovery accelerated in the first quarter of fiscal year 24-25, following a period of macroeconomic instability and currency volatility.

Growth in the current fiscal year is expected to be led by “communications, accommodation, food, transport and storage (excluding the Suez Canal) and financial services”, along with the manufacturing sector, which is showing signs of recovery after contracting last year.

“Prices are likely to continue to decline due to base effects and tight monetary policy, despite necessary future adjustments to fuel prices,” the report continued, noting that inflation in January fell to 24%, the country’s lowest inflation reading since December 2022.

The report noted that Egypt’s external position has strengthened following the Ras al-Hikma agreement, however, “vulnerabilities remain.”

Despite the improvements, debt concerns remain at the forefront, with the country’s debt-to-GDP ratio expected to decline to 85% in FY2024-25, down from 96% the previous year.

However, the debt servicing burden remains high, according to the bank, with debt payments expected to account for 50-60% of government spending in the current fiscal year.

Economic growth in the southern and eastern Mediterranean region is set to stall in 2024, due to a contraction caused by the war in Lebanon and broader geopolitical instability.

A late-year recovery is fueling optimism, with growth expected to rebound in 2025. The region’s growth is forecast to reach 3.7% in 2025 and 4.1% in 2026, although risks – from geopolitical turmoil to climate shocks – remain elevated.