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World Bank Predicts 4.2% Economic Growth For Egypt In FY2025/26

by THEFUTURE.TEAM

January 22, 2025

Egypt’s economy is projected to experience steady growth in the coming years, with a forecasted GDP increase of 4.2% for FY 2025/2026, driven by private consumption, easing inflation, robust remittances, and a positive economic sentiment. The World Bank’s forecast also anticipates a 3.5% GDP growth for FY 2024/2025, reflecting the country’s gradual recovery.

According to the World Bank’s Global Economic Prospects report for January, this growth is primarily attributed to a boost in private consumption, which is supported by gradually easing inflation, alongside a surge in remittances and an overall improvement in investor sentiment. However, the report also cautioned that Egypt’s interest payments are expected to remain elevated in 2025, which could continue to weigh on the state’s budget.

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Economic Slowdown In FY2023/24

Egypt’s economy faced challenges in FY2023/24, with growth slowing to just 2.4%. The decline was largely attributed to a drop in shipping activity through the Suez Canal and a reduction in natural gas production. Additionally, the non-oil manufacturing sector faced a downturn due to rising input costs, supply bottlenecks, and previous foreign exchange shortages.

Signs Of Recovery Following Exchange Rate Liberalization

The liberalization of Egypt’s exchange rate in March 2024 has played a pivotal role in boosting investor confidence and driving private sector activity in the second half of the year. This policy shift has had a positive impact on the economy, though the International Monetary Fund (IMF) has revised its growth forecasts for Egypt downward. The IMF now projects a 0.5% reduction in Egypt’s real GDP growth for FY2024/25 and a 1% downward revision for FY2025/26.

Key Drivers of Egypt’s Economic Recovery

In January 2025, Egypt’s Information and Decision Support Center (IDSC) indicated that the country’s GDP growth could range from 3.5% to 4.5% in 2025, thanks to ongoing reforms aimed at boosting investment and controlling inflation. These efforts are expected to continue driving positive growth, as the country looks to strengthen its economy in the medium term.

The IMF has also revised its forecast, now predicting a 4% growth in Egypt’s economy in 2025, up from an anticipated 2.7% in 2024. The IMF estimates Egypt’s GDP at constant prices will rise to EGP 8.7 trillion in 2025, up from EGP 8.4 trillion in 2024. At current prices, GDP is expected to increase to EGP 17.5 trillion in 2025, a notable rise from EGP 13.8 trillion in the previous year.

Positive Growth Projections From International Institutions

International institutions, including the IMF, remain optimistic about Egypt’s economic outlook in 2025, with projections indicating sustained growth driven by the government’s reforms and improved consumption and remittance flows. The development of key infrastructure projects, such as Ras El-Hikma, combined with potential geopolitical easing, could further enhance Egypt’s recovery.

Looking at the medium term, the IMF projects that Egypt’s growth could reach around 5% between 2025 and 2029. The World Bank also expects positive growth trends, forecasting 3.5% growth for 2025 and 4.2% for 2026, spurred by increased investments and stronger private consumption, which is projected to rise by 4.8% in 2025, up from 4.6% in 2024.

Current Indicators Of Recovery

Recent data from Egypt’s planning ministry shows that the country’s GDP growth reached 3.5% in the first quarter of FY 2024/25, a notable improvement from 2.7% during the same period last year, indicating early signs of recovery following a period of economic slowdown. With sustained reforms and a focus on fostering investment, Egypt’s economy is on a positive trajectory, positioning it for continued growth in the coming years.

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Cyprus Central Bank Cuts Growth Outlook As Middle East Tensions Lift Inflation Forecast

The Central Bank of Cyprus has lowered its economic growth forecasts for 2026 and 2027, warning that the war in the Middle East is creating a more challenging outlook for the economy through weaker tourism, higher energy prices and continued uncertainty over global trade. While domestic demand is expected to remain resilient, the bank now expects slower growth and higher inflation than it projected just three months ago.

Growth Outlook Softens On Geopolitical Shock

In its June 2026 Economic Bulletin, the Central Bank revised its GDP forecast for this year to 2.5%, down from 2.7% in March. Growth for 2027 was also trimmed slightly, from 3% to 2.9%, while the economy is still expected to expand by 3.1% in 2028.

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According to the bank, the downgrade is relatively modest because the March projections had already incorporated conservative assumptions about geopolitical risks. Even so, the outlook remains highly dependent on developments in the Middle East. If the agreement announced between the United States and Iran fails to materialise or is not implemented, Cyprus could face fuel shortages, higher import costs and further supply-chain disruption.

Those risks are expected to weigh most heavily on tourism, shipping, construction and real estate. As a result, the Central Bank expects net exports to subtract from economic growth this year because of weaker tourism revenues, lower shipping receipts and slower growth in other service exports. Domestic demand, however, should continue to provide support, helped by higher real household incomes, a resilient labour market and continued investment in large private projects, even if some of them are delayed.

“Although their implementation schedule may be affected by the crisis in the Middle East, these projects are not expected to be cancelled,”
the Central Bank said.

Inflation Forecast Raised

The biggest revision in the latest projections concerns inflation. The Central Bank now expects inflation, measured by the Harmonised Index of Consumer Prices (HICP), to average 3.2% in 2026, compared with 0.8% in 2025 and 0.5 percentage points higher than forecast in March.

Higher energy prices remain the main driver, reflecting the impact of the conflict on international oil markets and supply chains. Those pressures are expected to feed through to food prices and other goods before inflation gradually eases to 1.9% in both 2027 and 2028. Core inflation, which excludes food and energy, is projected to rise to 2.3% this year before moderating over the following two years.

Labour Market Remains A Bright Spot

Despite the weaker economic outlook, the labour market is expected to remain resilient. Employment growth is forecast to slow from 1.7% in 2025 to 1.3% this year before recovering in 2027 and 2028, while unemployment is projected to edge up only slightly to 4.6% before stabilising around 4.5%, a level the Central Bank considers consistent with full employment.

At the same time, policymakers warned that risks to inflation remain tilted to the upside. Persistently high oil prices, climate-related disruptions and stronger-than-expected wage growth could all keep price pressures elevated for longer than currently forecast.