Fitch Solutions revises its GDP projections for Egypt in FY2024/2025 from 4.2%

its GDP growth forecast for the 2024/2025 fiscal year, lowering it to 3.7 percent from an earlier projection of 4.2 percent.

Despite this adjustment, Fitch remains cautiously optimistic about Egypt’s economic outlook. The report points out that the revised growth forecast still exceeds the 2.4 percent growth recorded in the previous fiscal year, reflecting a positive trajectory for the country’s economy.

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 percent due to the ongoing conflicts in the Middle East.

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

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 percent for FY2024/2025, and the IMF, which expects a 4.1 percent growth.

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

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