Egypt’s economy is entering a new phase of resilience and opportunity, underpinned by the early successes of reform and a more favorable global environment. Real GDP growth accelerated to 4.4 percent in FY25—doubling the pace of the previous year—reflecting the impact of improved foreign exchange availability, streamlined import policies, and strengthened macroeconomic management. This momentum is further fueled by robust export performance, rising private consumption, and a surge in private investment, notably as landmark Gulf-backed projects transition from planning to execution. The recovery of non-oil manufacturing and a thriving tourism sector are reinforcing Egypt’s diversified growth base, even as disruptions in the Suez Canal and persistent challenges in extractive industries present ongoing risks.

Inflationary pressures are beginning to ease, with urban inflation declining to 12 percent in August 2025, though the cost of living remains elevated. Modest labor force participation highlights the strategic imperative for inclusive growth—ensuring that economic gains translate into job creation, skills development, and expanded social protection.

Looking ahead, Egypt’s medium-term prospects are increasingly promising, contingent on sustained reform momentum. Growth is projected to rise from 2.4 percent in FY24 to an average of 4.5 percent over FY25–FY27, supported by moderating inflation, rising private investment, and steady export expansion. Achieving this trajectory will require decisive progress on structural and fiscal reforms. The headline deficit is expected to widen to 7.4 percent of GDP in FY25, driven by higher interest costs and softer non-tax revenues. From FY26 onward, fiscal consolidation is set to accelerate, anchored by VAT reforms, rationalized tax expenditures, and enhanced tax administration. Gradual energy subsidy reduction—paired with targeted support for the most vulnerable—will help rebuild fiscal buffers and reinforce long-term sustainability. Government debt is projected to decline from 90.1 percent of GDP at end-FY24 to 84.8 percent at end-FY25, supported by a primary surplus and favorable real interest rates.

Nevertheless, contingent liabilities, particularly in the energy sector, remain a source of fiscal risk. Continued engagement with the IMF’s Extended Fund Facility and international partners—including Eurobond issuances and multilateral financing—will be essential to safeguard external stability and reinforce reform credibility.

The National Narrative for Economic Development offers a strategic platform to consolidate recent achievements and articulate a clear vision for a competitive, private sector-driven, export-oriented economy. By deepening reforms and maintaining steady implementation, Egypt is well-positioned to transform its current recovery into durable, inclusive, and sustainable growth.