Brooks made her remarks in answer to Ahram Online's question on the key drivers behind upgrading Egypt’s real GDP growth in its latest World Economic Outlook (WEO) report released on Tuesday. This took place in a press conference the fund organised on Tuesday to launch the report.
Brooks attributed the upgrade to notable improvements in Egypt’s non-oil manufacturing, tourism, and telecommunications sectors. “The buoyancy in these sectors has more than offset declines in Suez Canal activity and mining and extraction.”
Looking ahead, Brooks expects stabilization in the Suez Canal and mining sectors, alongside continued strength in Egypt’s key growth drivers.
“Going into 2026, we anticipate sustained expansion in the sectors that have led the recovery so far,” she added.
On inflation, Brooks noted a favourable development: in August, Egypt’s inflation rate fell to its lowest level in 40 months. She credited the decline to tight monetary and fiscal policies, easing foreign exchange shortages, and the fading impact of currency depreciation.
“These factors have helped anchor inflation expectations and support macroeconomic stability,” Brooks said, adding that further details on Egypt’s outlook will be discussed during regional press briefings later this week.
IMF lauds peace plan
Brooks also noted that the IMF has welcomed recent developments toward a Gaza peace plan, describing the announcement of its first phase as a potential turning point for political and economic stability.
She said the peace initiative could lay the groundwork for a lasting recovery across the Middle East and North Africa.
“The announcement of the first stage of a peace plan would be a major achievement, not only politically but also in terms of its economic implications for the region,” one official said, noting that further details would be addressed in upcoming regional briefings.
Brooks added that the fund stands ready to work with the international community to support recovery efforts. “This presents an opportunity to build the foundations for lasting recovery in the region,” he said.
She also confirmed that the IMF has upgraded its growth forecasts for the broader region, including both oil-exporting and oil-importing countries. For oil exporters, the revision reflects the unwinding of voluntary production cuts in Saudi Arabia. For oil importers, improved prospects are being driven by lower commodity prices, strong remittance inflows, and a resilient tourism sector.
“These factors have contributed to a more optimistic outlook across the region,” she said, underscoring the potential for peace and economic cooperation to reinforce one another.
Global growth remains fragile
Globally, growth is holding up better than initially feared, but the outlook remains fragile and clouded by persistent trade tensions, Pierre-Olivier Gourinchas, Chief Economist and Director of the Research Department at the IMF, stated during the conference.
Gourinchas said the global economy has absorbed the tariff shock with more resilience than expected.
“Six months ago, we projected a range of possible growth downgrades, rom modest to significant. The good news is that the impact has landed at the modest end,” he said.
The IMF now expects global growth to reach 3.2 percent this year and 3.1 percent in 2026, he added.
Gourinchas attributed this resilience to several factors. The tariff shock itself turned out smaller than anticipated, thanks to trade exemptions, limited retaliation, and the private sector’s ability to adapt by front-loading imports and rerouting supply chains.
Financial conditions have remained loose, supported by a weaker dollar, and fiscal policy has turned expansionary in key economies such as Germany and China. In the United States, investment in artificial intelligence and technology is booming, further bolstering activity.
Still, Gourinchas cautioned that the tariff shock is real and continues to weigh on growth prospects. Even in the United States, growth has been revised downward, the labour market is softening, and inflation remains persistently above target, signs of a negative supply shock.
“The outlook is fragile and highly sensitive to developments on the trade front,” he warned, noting that renewed tensions could quickly disrupt supply chains and shave up to 0.3 percentage point off global output.
Beyond trade, Gourinchas flagged several risks that could further dim the global outlook. He drew parallels between the current surge in AI-driven investment and the dot-com boom of the late 1990s, warning that surging valuations and consumption could trigger tighter monetary policy. A sharp market correction, he said, could reduce wealth and investment, with spillovers to broader financial conditions.
He also expressed concern over China’s growth model, pointing to lingering weaknesses in the property sector and the risk of a debt-deflation trap. While industrial policy has delivered gains in strategic sectors like electric vehicles and solar panels, Gourinchas said it may have led to resource misallocation, with little improvement in overall productivity.
Fiscal vulnerabilities remain a pressing issue, particularly in low-income countries. Many governments have yet to rebuild fiscal space, even as they face rising interest rates, elevated debt levels, and new spending demands, from defence to climate adaptation. Gourinchas warned that weak growth and constrained budgets could fuel social unrest, especially among unemployed youth.
He also underscored the importance of protecting central bank independence. “Calls to ease monetary policy to support growth or reduce debt service costs—at the expense of price stability—always backfire,” he said.
“Trust in central banks anchors inflation expectations. Once that trust erodes, macroeconomic stability deteriorates, and everyone loses.”
Despite these risks, Gourinchas struck a cautiously optimistic tone. He said the outlook could brighten if trade uncertainty is resolved through clear bilateral and multilateral agreements and lower tariffs.
He also highlighted the productivity potential of AI and the importance of sound domestic policies, restoring fiscal space, improving public spending efficiency, and maintaining transparent, independent monetary policy.
“Governments must invest in the future and empower private entrepreneurs,” Gourinchas concluded. “That’s how we build resilience and unlock sustainable growth.”
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