In its country risk report for FY 2024/25, Fitch revised down its forecast for Egypt’s economic growth 0.5% to 3.7%.  This comes on the back of weak performance in the fourth quarter of FY2023/2024 —  which concluded on 30 June 2024 —  and persistent disruptions in the Suez Canal.

Remember:

In its previous country risk report, Fitch had maintained its forecast for Egypt’s economic growth at 4.2%, but noted that this projection comes with an expectation for the war on Gaza to end this year.

The war drove Suez Canal revenues to fall between USD six- seven billion over the past 7-10 months due to Red Sea disruptions. 

Going forward:

Fitch now anticipates growth to reach 5.1% in FY 2025-2026, an increase of 0.4% from their earlier projection. The forecast comes on the back of anticipated normalization in Red Sea navigation/activity, and a rebound in the services sector performance due to easing geopolitical tensions.

Additionally, the report projected robust investment activity, fueled by foreign investments and decreased borrowing expenses.

Inflation is expected to inch down below 20% by February 2025 due to significant base effects, and the CBE will begin its easing cycle either before or immediately after February, Fitch said.

Fitch expects inflation to stabilize at an average of 7.0% annually from 2026 to 2033.

Interest rates:

The agency said earlier it expects the CBE to cut interest rates by up to 1,200 basis points in 2025 as major central banks begin easing cycles.

According to Fitch, Egypt is also expected to reduce its current account deficit to 4.2% of GDP  — USD 13.2 billion — in fiscal year 2024/25, partly on the back of higher remittance inflow, which Fitch will rise 31% YoY this fiscal year to USD 28.9 billion (c. 9.1% of GDP.)