The International Monetary Fund (IMF) has raised its growth forecast for Egypt’s economy to 4.7 per cent this fiscal year and 5.4 per cent in 2026-2027, up from 4.5 per cent and 4.7 per cent, respectively.
This is the second time in three months that the IMF has raised its expectations for Egypt, according to the fund’s January World Economic Outlook.
Mohamed Abu Basha, head of research at local investment bank EFG Hermes, attributed the more optimistic outlook to the improvement of economic indicators, citing the easing of inflation and the interest rate cuts that began last year and are expected to continue this year.
He also pointed to rising foreign investors’ appetite for expanding operations in Egypt, alongside a relative improvement in purchasing power as inflation cools.
Beyond domestic factors, global conditions have also improved, with the end of the war in Gaza, the beginning of recovery in Suez Canal revenues, and brighter prospects for the tourism sector, Abu Basha said.
Annual urban inflation stood at 12.3 per cent in November and December 2025, amid relative stability in food and beverage prices. According to the Central Agency for Public Mobilisation and Statistics (CAPMAS), monthly inflation slowed to 0.2 per cent in December, down from 0.3 per cent in November.
Retreating inflation in 2025 has led the Central Bank of Egypt (CBE) to cut interest rates by a total of 7.25 per cent throughout the year.
Hassan Al-Sadi, a professor of financial economics at Cairo University, believes Egypt’s economy will continue to grow thanks to the positive effects of infrastructure projects implemented by the government in recent years in the industrial and agricultural fields.
The Ministry of Planning attributed the accelerating growth to the economic and structural reforms meant to support the economy, empower the private sector, and steer the economy towards high-productivity tradable sectors such as industry, tourism, and communications.
Growth in the first quarter of the 2025-2026 fiscal year was supported by expansion across several sectors, including industry, tourism, and information and communications technology, in addition to some shipping lines deciding to resume their journeys through the Suez Canal leading it to record growth for the first time since the second quarter of 2023-2024.
Abu Basha expects people’s purchasing power to increase compared with last year as inflationary pressures subside. He also pointed to the recovery of domestic and foreign direct investment (FDI) in 2025, supported by stability in the exchange rate and lower interest rates.
He added that lowering interest rates will further bolster investment, mentioning the rebound in foreign investment despite the absence of asset sales.
The non-oil manufacturing sector delivered a strong performance in the first quarter of 2025-2026, driven by solid activity in several industries, most notably motor vehicles, chemical materials and products, beverages, furniture, pharmaceuticals and chemical preparations, and ready-made garments, read a Ministry of Planning statement.
These sectors benefited from expanding production to deliver greater exports.
Suez Canal activity also registered positive growth of 8.6 per cent for the first time since the second quarter of 2023-2024, after nearly 18 months of contraction owing to geopolitical tensions in the Red Sea that had weighed heavily on the number of vessels transiting the Canal.
The industries that delivered positive results in the first quarter of the fiscal year were those that were able to deliver exports, Al-Sadi stated. Moreover, several companies recently announced they had signed contracts in the Suez Canal Economic Zone. Al-Sadi argued that the expansion of export-oriented manufacturing, together with rising tourism revenues, helps stabilise the dollar exchange rate and, in turn, attracts more foreign investment.
The IMF’s projections for this fiscal year, which ends on 30 June, are slightly below those of the government, which is targeting growth of five per cent after an expansion of 4.4 per cent in 2024-2025.
For the first time in more than three years, Egypt’s GDP grew by 5.3 per cent in the first quarter of 2025-2026, up from 3.5 per cent in the first quarter of the previous year.
The World Bank also expects an improvement in Egypt’s growth rates driven by stronger exports and a recovery in economic activity. It said the upturn would be supported by stronger private demand as a result of the easing of import restrictions and foreign-currency constraints, developments that would boost overall economic momentum and raise the contribution of net exports to growth.
Rania Al-Mashat, the minister of planning, economic development, and international cooperation, said the National Narrative for Economic Development aims to lift economic growth to seven per cent by 2030, up from 4.5 per cent targeted this year.
Al-Mashat’s ministry stated that Egypt’s GDP growth rose by five per cent in the fourth quarter of 2024-2025, up from 2.4 per cent a year earlier. This helped raise annual growth for 2024-2025 to 4.4 per cent, up from 2.4 per cent in 2023-24, exceeding the government’s target of 4.2 per cent, it added.
Economic expert Mohamed Fouad said that government projections set out in the National Narrative issued by the Ministry of Planning are higher than those of the IMF. The government expects the Egyptian economy to grow by 5.3 per cent in the current fiscal year, rising to six per cent next year, then to 6.5 per cent in 2027-2028, before reaching seven per cent in 2028-2029.
He attributes the government’s optimism to expectations of sustained growth across several sectors, including productive industries, tourism, and information technology, alongside an acceleration in economic activity fueled by lower interest rates, which stimulate business conditions, and easing inflation, which increases demand.
According to the narrative, the government has outlined several growth scenarios for 2030: a baseline case of 6.2 per cent; a full-reform scenario with growth projected at 7.5 per cent; and a conservative scenario of five per cent.
The optimistic outlook comes against a backdrop of global turbulence and tensions caused by the US, which has threatened Iran with strikes should it persist in its domestic policies and the suppression of protesters.
Al-Sadi argued that the US threats, whether concerning Greenland or Iran, could prompt powers such as Japan, China, Turkey, and Egypt to strengthen coordination and alliances across the region.
He also believes that despite the losses Egypt has incurred as a result of the disruption to navigation in the Suez Canal, the country remains the only one capable of leading the reconstruction of Gaza, given its capabilities relative to other regional states.
He added that the launch of reconstruction efforts would boost demand for a wide range of products and stimulate activity across numerous industries.
* A version of this article appears in print in the 29 January, 2026 edition of Al-Ahram Weekly
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