The latest edition of the World Bank Group’s Economic Update said the ongoing conflict, including the closure of the Strait of Hormuz and damage to key energy and public infrastructure, has disrupted markets, heightened financial volatility, and weakened the region’s economic outlook for 2026.
While the report does not single out Egypt, it places the country within a broader regional context facing renewed external pressures amid already persistent structural challenges, including weak productivity growth, limited private-sector dynamism, and labour-market constraints.
According to the report, overall growth across the region, excluding Iran, is projected to slow to 1.8 percent in 2026, down from 4.0 percent in 2025 and 2.4 percentage points below the World Bank’s January forecast.
The slowdown is expected to be most pronounced in Gulf Cooperation Council (GCC) economies and Iraq, which are more directly impacted by the conflict. The GCC countries' growth has been downgraded by 3.1 percent and is now forecast to decelerate from 4.4 percent in 2025 to 1.3 percent in 2026.
The World Bank warned that risks remain tilted to the downside, particularly if the conflict persists. A prolonged crisis could lead to higher energy and food prices, weaker trade, tourism, and remittance flows, and increased fiscal pressures across the region, which may spill over into economies such as Egypt.
“The current crisis is a stark reminder of the work ahead for the region: not only to weather shocks, but to rebuild more resilient economies,” said Ousmane Dione, World Bank Vice President for the MENAAP region.
The report also underscored the need for stronger governance, improved macroeconomic fundamentals, and targeted reforms to support job creation and long-term resilience.
It further examined the role of industrial policy in driving growth, noting that while many governments in the region have expanded such policies over the past decade, often through sovereign wealth funds and state-owned enterprises, outcomes have been mixed due to institutional and implementation challenges.
World Bank Chief Economist for the region, Roberta Gatti, stressed the importance of maintaining a long-term reform agenda alongside efforts to address immediate economic pressures.
“Peace and stability are preconditions for durable development,” she said, emphasizing that sustained reforms are essential to building competitive, job-rich economies.
The Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) will take place in Washington, D.C. from 13 to 18 April, with high-level Egyptian participation anticipated.
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