The report highlights a widening gap between oil-exporting and oil-importing economies, with the latter, including Egypt, struggling to regain momentum amid a complex and uncertain global landscape.
It underscored how ongoing regional conflicts and heightened global uncertainty are undermining economic activity in oil-importing countries. While oil exporters have managed to offset weak oil production with robust non-oil growth, oil importers are grappling with a more challenging environment.
The report attributed the slowdown to several overlapping factors, including spillovers from escalating global trade tensions, tighter financial conditions, and the lingering effects of regional instability.
These pressures are compounded by slower-than-expected progress on structural reforms, particularly in Egypt, where reform fatigue and external vulnerabilities are beginning to surface.
Egypt: Reform delays and external pressures
Egypt’s economic outlook remains subdued, with the report pointing to a slower-than-anticipated pace of reform implementation. While the country has made notable strides in macroeconomic stabilization in recent years, the IMF warned that momentum has weakened, especially in areas critical to private sector development and fiscal sustainability.
The report noted that Egypt’s exposure to global financial tightening has increased its external financing costs, complicating debt management and investor sentiment.
Inflation, though projected to ease gradually, remains elevated, and currency pressures continue to affect consumer confidence and business planning.
Structural bottlenecks—particularly in state-owned enterprise reform, competition policy, and the investment climate—are cited as key constraints to growth. The report called for renewed efforts to accelerate reform delivery, improve transparency, and deepen financial inclusion to unlock Egypt’s medium-term potential.
For Egypt, the IMF’s message is clear: the country stands at a critical juncture. While its medium-term prospects remain positive, realizing them will require a renewed commitment to reform, stronger policy coordination, and a proactive approach to managing external risks.
As global uncertainty continues to rise, Egypt and its regional peers must chart a path that balances short-term stabilization with long-term transformation. The IMF’s latest outlook offers both a warning and a roadmap—one that calls for resilience, reform, and regional cooperation in the face of mounting economic headwinds.
Regional outlook: Diverging paths
Across the broader MENA region, the report observed a divergence in performance between oil exporters and importers. In 2024, oil-exporting economies maintained modest growth, averaging 2.2 percent, despite extended OPEC+ production cuts and sanctions on Iran. This resilience was largely driven by strong non-oil activity, especially in Gulf Cooperation Council (GCC) countries, where sovereign wealth fund investments and diversification efforts supported domestic demand.
Non-oil growth among MENA oil exporters reached 3.4 percent in 2024, with Saudi Arabia and other GCC states benefiting from improved business environments and rising foreign direct investment. Outside the GCC, Algeria saw a boost from fiscal stimulus, while Iraq’s expansion was more constrained due to financing limitations.
However, the IMF cautioned that growth in 2025 and 2026 is expected to be slower than previously forecast. The delay in resuming full oil production, persistent regional conflicts, and sluggish reform progress are expected to temper recovery across the region.
The report also warned that risks to the regional outlook remain “tilted to the downside.” Chief among these are the potential escalation of conflicts, prolonged global trade disruptions, and further tightening of financial conditions.
Its analysis shows that spikes in uncertainty—such as those triggered by global shocks—can lead to significant and persistent output losses. For the average economy in the MENA and Central Asia regions, output could fall by as much as 4.5 percent below trend two years after a major uncertainty shock.
Nonetheless, the report identified potential upside risks. A swift resolution to regional conflicts and more effective implementation of structural reforms could lead to stronger-than-expected growth in the near and medium term.
Policy recommendations: Stability and reform
To navigate the current challenges, the report urged policymakers across the region to prioritize macroeconomic stability while accelerating structural reforms.
Key recommendations include strengthening fiscal sustainability through targeted spending and improved revenue mobilization, safeguarding price stability by anchoring inflation expectations and managing currency pressures, and accelerating reform delivery in areas such as governance, competition, and private sector development.
The IMF also called for enhancing regional integration to diversify trade and investment flows and build resilience to external shocks, along with improving institutional frameworks to support effective crisis response and long-term development.
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