Fitch Solutions expects the Egyptian economy to grow by 3.9%, an acceleration from the 2.4% growth in the last fiscal year, due to an improved economic environment and higher consumption.
It expects the Egyptian pound to trade between EGP 50 and EGP 55 against the US dollar in 2025, and that pressure on the currency will remain in place during the first quarter of 2025 due to the maturity of treasury bills, in addition to the strength of the US dollar and uncertainty about the policies of the Trump administration.
It expects inflation pressures to stabilize during the current year at an average of 16.8% on an annual basis compared to an average of 28.3% last year, allowing the Central Bank to ease monetary policies and support growth.
It also expects the Central Bank to cut interest rates by 9% during the current year, joining other major central banks that have started monetary easing cycles.
Monetary easing to appear later this year, and renegotiating the IMF program would contribute to setting a longer timetable for fuel and electricity price increases, which would reduce inflationary pressures. It said that this could prompt them to lower their inflation and interest rate expectations and possibly raise growth expectations in 2025.
Fitch said that imported inflation is one of the main risks to inflation in Egypt in 2025, as the Egyptian pound is expected to decline by 13.5% during the year, from an average of EGP 45.3 per dollar in 2024 to EGP 51.4 in 2025.
"Devaluation of the currency leads to imported inflation in markets that rely heavily on imports, which affects the purchasing power of consumers in Egypt," it added.
Consumers may be affected directly through higher prices of imported goods for direct consumption, as well as indirectly through changes in the costs of imported goods used as inputs in local production.
Egypt is relying on imports for many food products such as grains, meat and poultry, consumers will be forced to opt for lower-priced goods in the absence of government support.
Remittance
Remittance flows through official channels have been recovering since the liberating of exchange rates in March 2024, with remittances rising from $5 billion in Q3 of FY2023/24 to $7.5 billion in Q4 of FY2023/24, the highest level since the emergence of the parallel market in Egypt during Q4 of FY2021/22.
Fitch Solutions expects remittance flows to continue to rise, especially with the recovery of the economies of the Gulf Cooperation Council countries, which host a large percentage of Egyptians, as their economies are expected to grow from 1.4% in 2024 to 4.2% in 2025.
After two years of contraction, the agency expects remittance flows to Egypt to rise from $21.9 billion in the fiscal year 2023/24 to $28.7 billion in the current fiscal year.
Tourism Sector
The tourism sector will continue to recover in 2025, as according to Fitch Solutions, the number of incoming tourists, which reached 15.7 million tourists last year, is expected to grow by 15.0% year-on-year, compared to about 10.5% year-on-year in 2024.
It attributed the ongoing recovery to the increase in incoming tourism from Europe and the Middle East, in addition to the improvement in global travel sentiment.
However, risks remain, including geopolitical tensions and a potential economic slowdown in key tourism-source markets, it said.
Investment Outlook
Investment in Egypt is expected to pick up in 2025, supported by structural reforms and improved investor sentiment, according to Fitch Solutions.
The firm estimates that real gross fixed capital formation growth will reach 4.5% y-o-y, compared to 2.1% y-o-y in 2024.
Key sectors driving investment include energy, infrastructure and tourism. However, risks to the outlook include potential delays in reform implementation and difficulty in securing external financing.
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