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2025-07-29 18:38:55
[Egypt's Economic Mist: Can Reforms Withstand the Double Impact of Inflation and Exchange Rates?] ⑴ A Reuters poll on July 29th projected Egypt's economy to grow by 4.0% in the fiscal year ending in June, an upward revision from the 3.8% forecast in April. ⑵ This growth is driven by reforms supported by IMF financing and stronger manufacturing activity, which are driving a gradual economic recovery. ⑶ Economists' median forecast predicts that Egypt's gross domestic product (GDP) growth will accelerate to 4.6% this fiscal year. ⑷ Although Egypt's GDP growth fell to 2.4% last year, the government has accelerated economic reforms under an $8 billion IMF program and received $24 billion in investment from the UAE's sovereign wealth fund. ⑸ Regarding inflation, Egypt's annual urban consumer price index (CPI) has fallen from a peak of 38% in September 2023, falling to 14.9% in June and 16.8% in May. ⑹ Economists project that average headline inflation will decline to 12.5% by fiscal year 2025/26 and to 7.3% by fiscal year 2027/28, but will remain above the central bank's target range of 5%-9% for the fourth quarter of 2026. ⑺ The Egyptian pound is expected to weaken further, falling to 51.1 Egyptian pounds per dollar by the end of June 2026 and to 52.9 Egyptian pounds per dollar by June 2027. The current interbank exchange rate is around 48.6 Egyptian pounds per dollar. ⑻ The Central Bank of Egypt's overnight lending rate is expected to be gradually lowered from the current 25.0% to 17.5% by the end of fiscal year 2025/26 and to 13.0% the following year. ⑼ Despite the Central Bank of Egypt's cumulative interest rate cuts of 325 basis points in April and May, policymakers adopted a more cautious "wait-and-see" approach in July due to oil price volatility and uncertainty about global demand, suggesting a possible slowdown in the monetary easing cycle.
