UK-based research firm Capital Economics said the Egyptian pound continues to maintain its competitiveness in external markets, despite appreciating by around 5% since the beginning of the year, according to Al Arabiya.

The firm noted that in the past, such a rise would have sparked concerns due to its association with heavy currency management, which had previously led to an overvalued pound followed by sharp and destabilizing devaluations.

However, it stressed that the situation is different this time, as the current appreciation of the pound largely reflects the weakness of the US dollar.

 It pointed out that the Egyptian currency has lost nearly 7 % of its value against the euro since the start of the year, while remaining broadly stable on a trade-weighted basis during 2025.

Capital Economics further explained that its measure of Egypt’s real effective exchange rate (trade-weighted and adjusted for inflation differentials) has risen by about 10 % since the start of the year.

Yet it remains close to the low levels recorded after the 2016 devaluation, and is still about 25 percent weaker compared to early 2024.

On foreign trade, the firm said balance of payments data for Q1 2025 showed non-oil exports reached their strongest level since 2011, representing 10.9 % of GDP.

 This reflects the positive impact of last year’s devaluation in boosting export competitiveness.

Capital Economics also highlighted that Egypt’s current account deficit has improved significantly, now standing at a more favorable level compared to the post-devaluation period in 2016.

At the same time, the overall trade deficit widened slightly due to a deterioration in the energy balance.

Looking ahead, the company expects the deficit to narrow further in the coming periods as tourism revenues rise and disruptions to Red Sea shipping routes ease — factors that could give the Egyptian economy an additional push toward stability.