The update follows a recalibration in October 2025, when the World Bank revised up its outlook for Egypt by 0.7 percent for FY2025/26 and 0.2 percent for FY2026/27 compared to its previous April estimates.
The new projections come as Egypt’s economic outlook continues to improve, driven by the easing of import and foreign currency restrictions, which have bolstered private demand and strengthened net exports.
The report highlights that while economic activity across the Middle East and North Africa (MENA) has strengthened, geopolitical tensions remain elevated.
Humanitarian needs in Gaza remain acute due to access constraints, while other fragile economies face unique pressures, such as Yemen’s strained health system and Afghanistan’s challenges with returnees and recent earthquake damage.
Despite these challenges, economic activity across the MNA region has strengthened, primarily driven by rising oil production in oil-exporting countries and robust private-sector activity in oil-importing economies.
Growth among the region's oil exporters has been driven by oil production increases that exceeded early 2025 targets, alongside resilient non-oil activity in Gulf Cooperation Council (GCC) countries.
Similarly, Pakistan has seen a resurgence in industrial activity due to relaxed import restrictions and expanded credit, though its agricultural sector continues to recover from the impact of the 2025 floods.
Regional outlook
The World Bank projects that economic growth across the MNA region will strengthen to 3.6 percent in 2026 and reach 3.9 percent in 2027. This upward trajectory is primarily driven by accelerating growth in oil-exporting economies and is supported by a recovery in export sectors.
Consequently, net exports are expected to provide a positive contribution to the regional GDP throughout 2026 and 2027, complemented by a rise in private investment.
However, the forecasts for 2026 and 2027 were marginally downgraded from June projections, as oil production increases in 2025 were larger than previously assumed, leaving less room for expansion in the following two years.
Growth in GCC countries is forecast to rise to 4.4 percent in 2026 and 4.6 percent in 2027, reflecting steady expansion in non-hydrocarbon activity and higher hydrocarbon production.
In non-GCC oil exporters, growth is expected to remain weak at an average of 2.0 percent in 2026–27, amid tighter trade restrictions and fading fiscal support in some countries.
In oil-importing economies, overall growth is projected to edge up to an average of 4.0 percent in 2026–27, although prospects vary by country. In Egypt, growth is forecast to rise on the back of robust net exports and stronger private demand. In Pakistan, growth is expected to benefit from agricultural recovery and reconstruction following the 2025 floods.
By contrast, growth in Morocco and Tunisia is expected to slow due to weaker expansion in agriculture and manufacturing. In Djibouti, steady growth is projected, supported mainly by the development of large infrastructure projects.
Fragile states and global risks
The economic outlook for fragile and conflict-affected economies remains deeply uncertain and heavily reliant on regional stability. In Lebanon, the possibility of stronger growth is contingent upon meaningful progress in structural reforms.
Similarly, economic recovery in the West Bank and Gaza for the 2026–27 period is entirely conditional on the commencement of the reconstruction plan in 2026.
The report warned that downside risks include a renewed escalation of armed conflicts, rising violence and social unrest, tighter global financial conditions, further increases in trade restrictions, heightened global trade policy uncertainty, and more frequent or severe natural disasters.
For oil exporters, lower oil prices or higher price volatility could also weigh on growth. However, the World Bank noted that upside risks include stronger-than-expected technology-driven productivity gains and a deeper commitment to structural reforms.
In March 2024, the World Bank Group (WBG) committed over $6 billion of new financing to Egypt till 2027.
Resilience despite trade tensions
Globally, the report noted that the global economy is proving more resilient than expected despite persistent trade tensions and policy uncertainty. The report projected global growth to remain broadly stable over the next two years, easing to 2.6 percent in 2026 before rising to 2.7 percent in 2027, representing an upward revision from the Bank’s June forecast.
The report attributed the improved outlook mainly to stronger-than-expected growth, particularly in the United States, which accounts for nearly two-thirds of the upward revision to the 2026 forecast.
Despite this resilience, the report warned that the 2020s are on track to become the weakest decade for global growth since the 1960s. By the end of 2025, nearly all advanced economies are expected to record per capita incomes above their 2019 levels, while around one in four developing economies will still remain below pre-pandemic income levels.
In 2025, global growth was supported by a surge in trade ahead of policy changes and rapid adjustments in global supply chains. These temporary boosts are expected to fade in 2026 as trade and domestic demand soften. However, easing global financial conditions and fiscal expansion in several major economies are expected to help cushion the slowdown.
Global inflation is projected to decline to 2.6 percent in 2026, reflecting softer labor markets and lower energy prices. Growth is expected to strengthen again in 2027 as trade flows adjust and policy uncertainty diminishes.
“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.”
Gill warned that the global economy is set to grow more slowly than it did in the troubled 1990s while carrying record levels of public and private debt.
He urged governments to liberalize private investment and trade, rein in public consumption, and invest in new technologies and education to avoid stagnation and rising joblessness.
Developing economies to slow down
Growth in developing economies is expected to slow to 4 percent in 2026 from 4.2 percent in 2025, before edging up to 4.1 percent in 2027 as trade tensions ease, commodity prices stabilize, financial conditions improve, and investment flows strengthen.
Growth in low-income countries is projected to average 5.6 percent in 2026 and 27, supported by firmer domestic demand, recovering exports, and moderating inflation.
However, the report noted that this will not be sufficient to close the income gap with advanced economies.
Per capita income growth in developing economies is projected at 3 percent in 2026 –about one percentage point below its average during 2000–2019 – leaving developing-country incomes at only about 12 percent of those in advanced economies.
The report warned that these trends could worsen the job-creation challenge in developing countries, where around 1.2 billion young people are expected to reach working age over the next decade.
To address this challenge, the World Bank called for a comprehensive policy approach built on three pillars: Strengthening physical, digital, and human capital; improving the business environment through policy credibility and regulatory certainty; and mobilizing private capital to support investment.
Fiscal sustainability
The report also highlighted the need for developing economies to restore fiscal sustainability after years of overlapping shocks, rising development needs, and increasing debt-servicing costs.
A special chapter examined the role of fiscal rules, limits on borrowing, spending, or deficits, in improving public finance management. Countries with fiscal rules typically see their budget balances improve by 1.4 percentage points of GDP after five years, while the likelihood of sustained fiscal improvement rises by nine percentage points.
“With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority,” said M. Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group.
Kose stressed that while fiscal rules can help stabilize debt and rebuild policy buffers, their effectiveness ultimately depends on credibility, enforcement, institutional strength, and political commitment.
More than half of developing economies now operate under at least one fiscal rule, covering deficits, debt, spending, or revenue. However, the report cautioned that the medium- and long-term benefits of these rules depend heavily on the economic context and the quality of institutional frameworks.
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