According to the IMF’s World Economic Outlook (WEO) released on Tuesday, Egypt now ranks second among oil-importing countries in projected growth, following Uzbekistan.
Inflation and current account
Egypt’s inflation rate is expected to fall sharply to 11.8 percent in FY2025/26, from an average of 20.4 percent in FY2024/25, the report said.
The current account balance is projected to show a deficit of 4.3 percent of GDP. This figure reflects the gap between Egypt’s savings and investment, encompassing trade in goods and services, income from abroad, and current transfers such as remittances and foreign aid.
Unemployment is forecast to edge down to 7.3 percent, compared to 7.4 percent a year earlier.
Regional growth prospects
In the wider Middle East and Central Asia, economic growth is expected to accelerate from 2.6 percent in 2024 to 3.5 percent in 2025, and further to 3.8 percent in 2026. The IMF attributed the improvement to easing disruptions in oil production and shipping, and a gradual abatement of conflict-related pressures.
The 2025 forecast represents a 0.5-percent upward revision from April, driven by the faster-than-expected rollback of oil production cuts in Gulf Cooperation Council (GCC) countries, particularly Saudi Arabia, and stronger-than-anticipated economic performance in Egypt during the first half of 2025.
However, the report noted that despite the region’s relatively limited direct exposure to the new US tariff regime, the cumulative growth forecast for 2025 and 2026 is 0.8 percent lower than projected in the October 2024 WEO. This downgrade reflects the indirect effects of subdued global demand on commodity prices, which continue to weigh on regional export revenues.
Global trends
Globally, growth is projected to slow from 3.3 percent in 2024 to 3.2 percent in 2025, and 3.1 percent in 2026.
On a fourth-quarter-to-fourth-quarter basis, growth is expected to decline more sharply, from 3.6 percent in 2024 to 2.6 percent in 2025, before recovering to 3.3 percent in 2026. At market exchange rates, world output is forecast to grow by 2.6 percent in both 2025 and 2026, down from 2.8 percent in 2024.
The IMF said these projections show little change from the July 2025 WEO Update, reflecting a gradual adjustment to ongoing trade tensions. However, they remain decisively below the pre-pandemic average of 3.7 percent.
Meanwhile, a sequential growth from the second half of 2025 into 2026 is expected, removing distortions caused by front-loading in early 2025. Over this six-quarter period, the global economy is expected to grow at an annualized average rate of three percent, a 0.6 percent below the 2024 average.
Compared to the October 2024 WEO, the cumulative forecast for 2025–2026 is lower by 0.2 percent, reflecting the impact of major policy shifts in key economies.
Given the fluidity of trade policy assumptions throughout 2025, the IMF notes that comparisons with the April or July 2025 WEO updates may obscure broader trends, making the October 2024 WEO a more reliable benchmark for assessing the current trajectory.
Inflation and food prices
Global headline inflation is forecast to decline to 4.2 percent in 2025 and 3.7 percent in 2026, broadly in line with previous projections. The IMF cautioned that inflation dynamics vary widely by region.
In the United States, inflation is expected to rise temporarily in the second half of 2025 as tariffs feed through to consumer prices, rather than being absorbed within supply chains. Inflation is then expected to return to the Federal Reserve’s 2 percent target in 2027.
The baseline assumes only modest second-round effects, though the report flags potential upside risks to inflation and downside risks to employment.
Looking ahead, food price risks remain balanced in both directions. New export restrictions could tighten global supplies and push prices higher, while favourable weather conditions, larger-than-expected harvests, and higher tariffs could ease them. The potential onset of La Niña in the fourth quarter adds further uncertainty to the outlook.
Growth in emerging markets and developing economies is expected to moderate from 4.3 percent in 2024 to 4.2 percent in 2025 and 4.0 percent in 2026, according to the IMF. These projections are almost unchanged from the July WEO update but represent a cumulative upward revision of 0.6 percent compared to April.
Still, they remain 0.2 percent below the October 2024 forecast, with low-income countries facing a sharper downward revision than their middle-income peers.
World trade and external balances
World trade is expected to decline modestly over the next five years, the IMF said. Compared to the April 2025 WEO, global trade volumes are projected to grow faster in 2025 but slow in 2026, reflecting front-loading trends. The average trade growth rate for 2025–2026 is estimated at 2.9 percent, below the 3.3 percent projected in the October 2024 outlook.
Global current account imbalances in 2025 are also forecast to exceed earlier expectations before narrowing in the following years. Among the three largest contributors—China, Germany, and the United States—preemptive trade ahead of new tariffs has widened the US deficit and China’s surplus. These effects are expected to ease as front-loading behaviour fades.
Adjustment channels: Trade policy and exchange rates
The narrowing of global imbalances is expected to take place through three main channels.
The first is trade policy shifts. In the United States, rising import costs and heightened uncertainty are dampening investment and softening import demand. Tariffs on intermediate goods act as a tax on manufacturers, raising production costs for both export-oriented and import-competing sectors.
While higher tariff revenues may boost public savings, lower private savings are likely to offset these gains.
The second channel is exchange rate movements. Normally, higher unilateral tariffs would strengthen the currency of the tariff-imposing country, cushioning the shock.
However, the recent depreciation of the US dollar has instead boosted export competitiveness and curbed import-heavy consumption, potentially narrowing the US external deficit.
A weaker dollar also eases global financial conditions, offering short-term support to demand, though this benefit may fade as higher US inflation prompts an adjustment in the real effective exchange rate.
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