Fitch Solutions affirmed its economic forecast for Egypt’s growth in the current fiscal year (FY2024/2025), citing increased investment, a rebound in the manufacturing sector, and the expected resolution of the Gaza conflict by late 2024
Fitch Solutions maintained its economic forecast for Egypt’s growth in the current fiscal year (FY2024/2025), citing increased investment, a rebound in the manufacturing sector, and the expected resolution of the Gaza conflict by late 2024.
“We maintain our view that economic growth will pick up to 4.2% in FY2024/25, driven by higher investment, a recovery in the manufacturing sector and a normalization of traffic through the Suez Canal (assuming the war in Gaza ends in H2 2024). The hydrocarbons sector and the elevated cost of living will prevent a stronger rebound in economic growth,” explained Ramona Moubarak, Fitch Solution’s Head of MENA Country Risk, in a LinkedIn post.
Moubarak highlighted that remittance flows from Egyptians working abroad surged to $7.5 billion in Q4 FY2023/2024.
Egypt’s tourism sector demonstrated resilience amid increasing geopolitical risks, she added, further supporting economic stability.
In Fitch’s recent report, the agency projected that Egypt’s inflation would remain high in the latter half of 2024, averaging around 27% annually due to a weakened exchange rate and increases in managed prices like electricity and fuel.
As a result, Fitch anticipated that the Central Bank of Egypt (CBE) would maintain a strict monetary policy throughout 2024.
Inflation was expected to decline to under 20% by February 2025, potentially allowing the CBE to start easing monetary policy either before February 2025 or immediately after. Fitch projected the CBE to cut rates by 1,200 basis points later that year, in line with global easing trends.
Fitch also forecasted a reduction in Egypt’s current account deficit to 4.2% of GDP, or $13.2 billion, in FY2024/2025, citing increased remittances and a growing services surplus.
Foreign exchange reserves, which had reached a record $46.5 billion in July 2024, were projected to continue rising.
The exchange rate is expected to trend downward, ranging between EGP 47.9 - 49.5 against the USD for the rest of the year, with the ongoing war in Gaza projected to add pressure on the EGP and limit its recovery.
Looking ahead, Fitch expected the EGP to depreciate by 7% against the USD, with inflation declining to an average of 18.1% the following year.
Fitch expects the EGP to hit around EGP 57.63 against the USD by 2033.
