This anticipated decline in inflation is attributed primarily to the unwinding of base effects, coupled with the expected implementation of policy tightening measures that are anticipated to take effect during this period.

In a related vein, the Central Bank of Egypt (CBE) has established an ambitious inflation target to achieve a seven-percent rate (with a permissible variation of plus or minus two percent) by the fourth quarter of 2024.

Following this, the CBE aims to further refine its target to five percent (again, with a tolerance of plus or minus two percent) by the fourth quarter of 2026.

Further contextualizing the economic forecast, the IMF’s World Economic Outlook, released earlier in October, posits that inflation is projected to reach its peak in the current calendar year, anticipated to hit a staggering 33.3 percent. Subsequently, this inflation rate is expected to decline to 21.2 percent as the economy adjusts to the evolving conditions.

Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), had stated in the press conference conducted in October that inflation is anticipated to decrease in Egypt.

Meanwhile, the World Bank’s latest report, titled "Growth in the Middle East and North Africa," echoes this sentiment, projecting that Egypt’s inflation will similarly peak at an even higher rate of 33.6 percent this year before tapering off to a more manageable 17.2 percent in the following year.

It is noteworthy that, despite a general trend of declining inflation over the preceding five months, annual headline inflation surged to 26 percent in September. This rise came as a surprise, considering the downward trajectory observed previously.

In contrast, core inflation—a measure that excludes volatile items—experienced a modest decline of 0.1 percent in September, indicating some level of stability in underlying price pressures.

Fitch has projected that inflation will drop to 12.5 percent by the end of FY 2025.

Regional Comparisons and Broader Implications
 

On a broader regional scale, the report outlines that inflation rates for MENA Oil Exporters are projected to witness year-over-year changes of 8.8 percent and 8.3 percent for the fiscal years 2024/2025 and 2025/2026, respectively. This contextualizes Egypt’s inflation within a larger framework of regional economic dynamics.

Moreover, the IMF forecasts that Egypt will achieve a commendable reduction in its debt-to-GDP ratio, projecting a decrease of 6 percent for the fiscal year 2024/2025. This anticipated improvement results from the government’s concerted consolidation efforts and strategic planning, which includes allocating a portion of the revenues generated from the Ras El-Hekma deal toward reducing government debt.

Growth Prospects and Challenges Ahead
 

The IMF has indicated that Egypt's economic growth rate will likely be approximately five percent over the medium term.

This growth projection is contingent upon resolving ongoing conflicts in the Gaza and Israel regions and consistently implementing necessary reforms to stabilize and invigorate the economy.

Additionally, it stated that a prevailing lack of confidence among investors, coupled with significant shortages in foreign exchange, has imposed notable constraints on economic activity in Egypt during the first half of the fiscal year 2023/2024.

These challenges have been exacerbated by the ongoing geopolitical tensions in the region and disruptions in critical maritime routes in the Red Sea, further complicating the economic landscape.