Capital Economics forecasted a 5.0% GDP growth rate for FY2024/2025 in a recent research note, a more positive outlook compared to other institutions, marking a 2.6 percentage point increase from the previous fiscal year.

This forecast stands in contrast to the more cautious projections from other major institutions, with both the IMF and the World Bank recently downgrading their growth expectations for Egypt.

The World Bank reduced its forecast by 0.7 percentage points to 3.5%, while the IMF cut its estimate by 0.5 percentage points to 3.6%. However, Capital Economics remains more optimistic, citing several key factors that could support Egypt’s economic recovery.

For FY2025/2026, Capital Economics anticipates further growth, projecting a 5.3% expansion.

A major contributor to this positive outlook is the recent ceasefire between Israel and Hamas, along with the Houthi’s commitment to reducing attacks in the Red Sea.

These developments are expected to bolster activity through the Suez Canal, benefiting Egypt’s trade and logistics sectors. Additionally, the easing of security concerns could lead to a revival in Egypt's tourism industry, which had struggled amid geopolitical instability.

Capital Economics also highlights the benefits of a weaker Egyptian pound, noting that it has improved Egypt’s external competitiveness.

Inflation, which had been a significant issue, is expected to decrease sharply from 24.1% in December 2024 to below 10% in the near future. This anticipated drop in inflation should ease the financial burden on households, boosting real income and consumer spending. Additionally, Capital Economics predicts that this decline in inflation will likely lead to interest rate cuts, stimulating domestic credit demand and supporting economic growth.