After more than two years of economic pressures and extensive reforms, Egypt appears to be entering a new stage marked by improving macroeconomic indicators and growing investor confidence. Inflation has moderated, economic growth has accelerated, and foreign exchange shortages that once constrained activity have largely eased.
Whether these gains represent a durable shift from stabilization to sustainable growth remains a key question. To assess the outlook, Business Monthly spoke with Mohamed Abu Basha, Director and Head of Macroeconomic Analysis at EFG Hermes, and Hany Genena, Head of Research at Al Ahly Pharos.
Signs of a broader economic recovery
Recent indicators suggest that Egypt has established a degree of macroeconomic stability following the reforms launched in March 2024.
“The economy has indeed turned a corner, achieving macro stability and price normalization, reflected in availability of foreign exchange, reduced inflation, and improved economic activity,” Abu Basha said.
However, he noted that structural challenges remain. “The economy’s more structural issues are still to be tackled, including a more balanced growth model, reduced external financing vulnerabilities, lower debt burden, and a private-sector-led growth model,” he added.
Meanwhile, Genena believes Egypt is in the early stages of a broader recovery, although further improvements in external balances will be critical.
“Egypt is at the early stage of a broad-based recovery and will likely fully turn the corner when the current account deficit shrinks to levels below 2% of GDP,” he said.
According to Genena, the recovery gained momentum in the second half of 2025, supported by fiscal and monetary reforms implemented since March 2024, stronger external competitiveness, increased exports, and robust foreign currency inflows from tourism, remittances, and carry-trade activity.
“The current account deficit stood at around $13.9 billion last year, equivalent to roughly 3.5% of GDP,” he explained. “Historically, deficits below 2–3% of GDP have been associated with stronger foreign reserves, improved sovereign ratings, and greater resilience to external shocks.”
He added that, assuming geopolitical tensions ease, Egypt could complete its transition to a more stable growth phase by 2027/28.
Investment activity regains momentum
Lower inflation and the Central Bank of Egypt’s monetary easing cycle helped improve business sentiment during the second half of 2025.
“Improvement was translating relatively quickly, with the EGP’s appreciation reflecting restored confidence in the currency,” Abu Basha said. “Inflation was slowing, and the CBE was cutting rates. This was reflected in economic activity, where GDP growth has been running above 5%, despite headwinds affecting the energy sector and Suez Canal revenues. Private-sector credit and investment also began to recover.”
He noted that the recent regional conflict temporarily interrupted this trend, pushing inflation higher and delaying further rate cuts.
“We do not expect the easing cycle to resume before the end of the year,” he said.
Genena argued that investment activity remains largely supported by export-oriented industries. “The recovery has been primarily driven by export sectors such as fertilizers, textiles, and building materials,” he said. “These companies are able to borrow in foreign currency at lower rates than those prevailing in the domestic market, meaning the first phase of the investment cycle is unlikely to be derailed by elevated EGP interest rates.”
He expects a broader investment cycle to emerge as policy rates decline further, potentially beginning in 2027.
Rising FDI signals growing confidence
One of the clearest indicators of renewed confidence has been the increase in foreign direct investment.
“FDI reached a more than decade-high $12 billion in FY2024/25, excluding recent land deals and asset sales,” Abu Basha said.
He stressed that sustaining these inflows will require continued efforts to attract investments into manufacturing and services while reducing dependence on external borrowing and short-term capital.
“We need to see a consistent rise in FDI and a more balanced growth model,” he said.
Genena identified political and macroeconomic stability, regulatory predictability, and attractive investment opportunities as the key drivers of long-term FDI.
“Egypt currently scores highly in terms of political and macroeconomic stability and the availability of value-accretive opportunities,” he said.
However, he noted that fiscal pressures occasionally create regulatory uncertainty, citing unexpected fees imposed on some North Coast developments.
“We expect this volatility to subside following the completion of the IMF program in late 2026,” Genena said.
Strengthening resilience
Genena believes the reforms undertaken since March 2024 have significantly improved Egypt’s ability to absorb external shocks.
“The biggest risk would be a reversal of policies that reintroduce distortions into the economy, such as returning to a fixed exchange-rate regime or financing deficits through monetary expansion,” he said.
Maintaining macroeconomic discipline and investing in education, he added, will be essential for preserving growth momentum and improving long-term productivity.
Policy priorities going forward
For Abu Basha, sustaining the recovery will require four key priorities:
* Adopting a more targeted, sector-based approach to attracting foreign investment.
* Maintaining fiscal and monetary discipline.
* Expanding the role of the private sector while limiting the state’s economic footprint.
* Increasing tax revenues to reduce the country’s debt burden over the long term.
While challenges remain, both economists agree that Egypt has made significant progress in restoring macroeconomic stability. The next stage, they argue, will depend on translating that stability into a more diversified, investment-driven, and private-sector-led growth model.
