Ahmed Kamel – Egypt Daily News
Fitch Solutions has raised its forecast for Egypt’s economic growth in the 2025/2026 fiscal year to 5.3%, signaling growing confidence in the country’s macroeconomic outlook amid easing inflationary pressures, improving investment conditions, and a gradual recovery in external balances.
The revised forecast, issued by BMI, Fitch Solutions’ research arm, represents an upward adjustment of 0.3 percentage points from the company’s previous estimate published in October. Speaking during a virtual briefing, Mariette Hanna, senior MENA country risk analyst at BMI, said the upgrade reflects stronger-than-expected momentum across several key drivers of growth.
According to Hanna, Egypt’s expansion will be supported primarily by rising investment inflows as borrowing costs decline, the normalization of import activity following last year’s foreign currency shortages, and sustained growth in exports. She added that inflation is expected to follow a downward trajectory throughout the coming year, approaching the Central Bank of Egypt’s target range of 7%, plus or minus two percentage points, by the fourth quarter of 2026.
On the currency front, Hanna noted that improving economic stability should support further consolidation in the Egyptian pound, which Fitch Solutions expects to trade within a range of 47 to 49 pounds per US dollar. She emphasized that exchange rate stability will be underpinned by stronger capital inflows and improved confidence in the macroeconomic framework.
Abdallah Saleh, senior MENA country risk analyst at Fitch Solutions, said the anticipated decline in inflation will give the Central Bank of Egypt room to continue its monetary easing cycle. He expects cumulative interest rate cuts of around 600 basis points in 2026, followed by an additional 300 basis points in 2027. Such easing, he added, would help reduce pressure on public finances, particularly as around 35% of Egypt’s public debt is short-term and therefore highly sensitive to interest rate movements.
Despite the generally optimistic outlook, Fitch Solutions cautioned against Egypt’s growing reliance on portfolio investment inflows, which now account for roughly half of the country’s foreign exchange reserves. This dependence increases vulnerability to shifts in global investor sentiment. While these flows proved relatively resilient during the recent 12-day conflict between Iran and Israel, the firm warned that any future regional escalation could pose risks.
Fitch Solutions expects Egypt’s foreign currency reserves to rise to $52.6 billion by the end of June, up from more than $50 billion recorded in October. At the same time, the current account deficit is projected to narrow to around 3% of GDP in the 2025/2026 fiscal year, supported by stronger exports of goods and services and continued resilience in remittances from Egyptians working abroad.
The firm also expects the Egyptian pound to maintain its strong performance against the US dollar over the coming year, buoyed by increased investment in local equity and debt markets since August, driven by attractive yields. Fitch Solutions believes that ongoing interest rate cuts will not significantly erode the appeal of Egyptian bonds for foreign investors.
On the domestic front, Fitch Solutions forecasts a notable improvement in household purchasing power. The firm estimates that Egyptians’ real purchasing power will rise by around 23% next year compared with pre-pandemic levels, reflecting economic recovery, higher nominal wages, and a faster decline in inflation. By 2029, this increase is expected to reach 36%, supported by stronger consumption and broader economic normalization.
