Egypt’s economic growth is projected to moderate in the near term, according to the World Bank’s latest Macro Poverty Outlook report. The report also addresses external balances, fiscal performance, poverty reduction, and labor market conditions.
Economic Growth Projections
Egypt’s economic growth is projected at 4.3% in the current fiscal year (FY) 2025/2026, slowing to 4% in FY 2026/2027 before accelerating to 4.6% in FY 2027/2028. Sectoral GDP is expected to show uneven growth. Agriculture is forecast to expand by 1.7% in FY 2025/2026, rising to 2% in FY 2026/2027, and 3.5% in FY 2027/2028. Industry is projected to grow by 3.8% in FY 2025/2026, moderating to 2.8% in FY 2026/2027 and 4.1% in FY 2027/2028. The services sector is expected to remain the primary driver, growing by 5% in FY 2025/2026 and stabilizing at 5.1% in the following two fiscal years.
Inflation and External Balances
Inflation is projected to decline to 13.6% in FY 2025/2026, edge up slightly to 13.7% in FY 2026/2027, and then fall sharply to 6.7% in FY 2027/2028. External balances are expected to improve gradually, with the current account deficit projected at 4.2% of GDP in FY 2025/2026, narrowing to 4% in FY 2026/2027 and 2.6% in FY 2027/2028. Net foreign direct investment (FDI) inflows are forecast at 2.6% of GDP in FY 2025/2026, declining slightly to 2.3% in FY 2026/2027 and 2.2% in FY 2027/2028.
Fiscal Performance and Debt
The budget deficit is expected to narrow from 7.6% of GDP in FY 2025/2026 to 6.9% in FY 2026/2027 and 5.6% in FY 2027/2028. Government revenues are projected to rise from 15.5% of GDP in FY 2025/2026 to 16.2% in FY 2026/2027 and 16.7% in FY 2027/2028. Government debt is forecast to decline from 82.9% of GDP in FY 2025/2026 to 79.2% in FY 2026/2027 and 78% in FY 2027/2028, with external government debt falling from 21.2% to 19.9% and 18.3% over the same period. The primary surplus is projected at 3.1% of GDP in FY 2025/2026, increasing to 3.2% in FY 2026/2027 and 4% in FY 2027/2028.
Poverty and Labor Market
Poverty reduction is expected to remain limited in the near term, with the lower middle-income poverty rate projected at 12.5% in both FY 2025/2026 and FY 2026/2027, before easing marginally to 12.4% in FY 2027/2028. Labor market conditions are expected to gradually improve, with the employment rate rising to 43.2% in FY 2025/2026, 43.8% in FY 2026/2027, and 44.4% in FY 2027/2028.
Regional Impacts and Policy Responses
Spillovers from the regional conflict are already evident, driven by rising global oil and gas prices and capital outflows, placing additional strain on Egypt’s external and fiscal accounts and fueling inflation. A prolonged escalation could further impact key foreign currency sources, including tourism revenues, remittances, and Suez Canal receipts. Authorities have responded by maintaining exchange rate flexibility, tightening fiscal policy, expanding social safety nets, securing concessional financing, and increasing fuel and electricity prices to contain macroeconomic imbalances while offering targeted social support.
Structural Reforms and Long-Term Growth
Egypt had begun addressing structural constraints to growth prior to the recent escalation in regional tensions. Fiscal consolidation efforts, tax reforms, and improvements in infrastructure reliability supported a recovery in economic activity and labor force participation. Deeper reforms remain necessary to sustain long-term growth and job creation, particularly through reducing the state’s economic footprint, strengthening revenue mobilization, and improving the business environment alongside continued investment in human capital.
