Fitch Solutions revised down its forecast for Egypt's real GDP growth for the current fiscal year 2024/2025 in its latest Egypt Country Risk Report, now projecting a growth rate of 3.7%, down from an earlier estimate of 4.2%.

Despite the revision, Fitch remains cautiously optimistic about Egypt’s future, with the report explaining that the growth forecast for FY2024/2025 still surpasses the previous year’s performance of 2.4%.

Egypt's economy is on a recovery trajectory, it noted, adding that the pace has been slower than anticipated, partly due to regional geopolitical tensions and trade disruptions in the Red Sea.

The downgrade reflects weaker-than-expected economic performance in Q4 of FY2023/2024 and ongoing disruptions in Suez Canal traffic, which have exacerbated the country's financial challenges.

The Suez Canal — Egypt’s vital trade route and key foreign currency generator — has suffered a significant blow, with revenues falling by as much as 70% due to the ongoing conflicts in the Middle East.

Fitch anticipates that the Egyptian economy will rebound to a 5.1% growth rate in FY2025/2026, up from an earlier projection of 4.7%.

This expected recovery hinges on improved navigation in the Red Sea, easing geopolitical risks, and lower borrowing costs, all of which are expected to stimulate economic activity.

According to the report, the country’s economic resilience was largely attributed to the recovery of non-oil exports and the projected increase in investment activity, particularly in foreign investment and infrastructure projects.

Fitch’s outlook for Egypt is slightly more cautious than that of the Egyptian government, which has set a target growth rate of 4.2% for FY2024/2025, and the IMF, which expects a 4.1% growth.

The forecast remains more optimistic than the World Bank’s forecast of just 3.5% growth.

Fitch does not foresee a further weakening of the Egyptian pound (EGP) against the U.S. dollar, citing improved investor sentiment and market interventions.