Egypt Outlook

The economy is expected to strengthen further over the coming year, as the benefits from macroeconomic stabilization efforts and structural reforms under the IMF program feed through. Following the March 2024 policy reset, investment activity is picking up, manufacturing capacity expanding, and tourism receiving fresh impetus amid a more stable currency environment and clearly-articulated and reform-driven macro-fiscal direction. While external obligations remain sizable, global financial conditions volatile and domestic interest rates are still high, the combination of sectoral inflows, diversified funding sources, and improved policy credibility provides a more stable foundation for Egypt.

Growth recovery and investment momentum 

Economic activity should strengthen over the forecast period, with GDP growth forecast to accelerate from 4.7% in FY25/26 to 5.1% in FY26/27 as macro stabilization efforts feed through to investment, consumption, and external trade. The newly introduced National Economic Development Narrative (NEDN), which marks a strategic shift toward private-sector-led growth, export competitiveness, and institutional modernization, will play an increasingly significant role going forward. With FX more freely available and a more predictable exchange rate regime, business uncertainty has been reduced and key projects in the tourism, construction, and logistics sectors are moving ahead again. Manufacturing is also emerging as a core driver of our forecast, supported by incentives for export-oriented industries, improved energy availability, and streamlined regulatory procedures. Industrial zones, especially in chemicals, food processing, and textiles, are attracting new investment, with multinational firms expanding domestic production capacity. Non-hydrocarbon exports are becoming more competitive thanks to the more flexible exchange rate and stronger global demand, while agriculture-related exports remain resilient. Recovering domestic demand is expected to quicken further as confidence improves, real wages stabilize, and monetary conditions become more predictable.

Macro stabilization but still limited privatization progress

The economy has benefited from 2024’s IMF-mediated policy reset and macro stabilization program. Subsidies have been retargeted, reserves have climbed to all-time highs and banking system NFAs are back at pre-Covid levels. Though on privatization, more tangible progress is being sought by investors, not least to address concerns about market crowding-out. The local debt market is also being deepened (new sukuk program) to diversify funding channels. Preserving a credible, rules-based framework will be essential to maintaining stability and limiting the buildup of imbalances as the IMF deal winds down in late 2026. 

Inflation path and policy direction

Inflation is expected to decline from an average of 14% in 2025 to 11% in 2026, supported by a credible exchange-rate regime, high policy interest rates, easing supply-chain constraints, and softer global food prices. The forecast takes into consideration the (temporary) inflationary impact on fuel and transport costs from the fuel price hike in late 2025. Pass-through will remain contained by stable demand and improved FX liquidity. The Central Bank of Egypt is expected to remain cautious in reducing interest rates, possibly by 600bps in 2026. 

Fiscal consolidation and NEDN reforms

The public finances are on a better footing and expected to improve further, with the overall fiscal deficit likely to narrow from 7% of GDP in FY24/25 to 6% of GDP in FY26/27 as the authorities press ahead with paring back subsidies, expanding revenue streams, and rationalizing expenditures. In this vein, to reduce budgetary pressures domestic fuel-prices were again raised in October 2025 closer to global levels. Tax system digitalization, base-broadening, and better public-financial management is also progressing. 

External position bolstered by remittances and tourism 

Egypt’s external balance is improving amid a rebound in FX-generating activities, such as tourism, and more stable capital inflows. The external outlook is further supported by resilient remittances, up significantly after the currency was devalued. We see the current account deficit narrowing from -4.2% of GDP in FY24/25 to around -3% of GDP by FY26/27. Tourism is worth a special mention, as the opening of the Grand Egyptian Museum in Giza is expected to lift arrivals, which already surged 21% y/y in 2025, considerably higher. At the same time, the gradual normalization of Red Sea shipping post-Gaza ceasefire has started boosting Suez Canal receipts. These two sectors, along with strategic FDI commitments, such as Qatar’s investment in the Alam El-Roum development, will remain central to rebuilding external buffers and improving FX liquidity. FX reserves have climbed to multi-year highs of $50 billion, covering around 8 months of imports. 

Outlook shaped by reforms, interest rates, geopolitics 

Downside risks could stem from geopolitical disruptions, global interest-rate volatility and, as a net energy importer, higher oil and gas prices. Progress on privatization could also underwhelm. Conversely, better-than-expected reform progress and outperforming tourism inflows as well as lower energy costs and sustained GCC investor interest would materially improve the outlook.

Table 1: Key economic indicators    Source: Official sources, NBK forecasts; fiscal years end in June.

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