According to the government’s latest statistics, Egypt’s economy is rapidly recovering. In the first quarter of fiscal year (FY) 2025/2026, GDP grew 5.3%, up from 3.5% a year earlier, “marking the strongest quarterly performance in over two years,” according to a November statement from the Ministry of Planning, Economic Development and International Cooperation (MPED). It forecast that GDP growth would not fall below 5% by the end of the fiscal year.

It said this “acceleration reflects the tangible impact of ongoing economic and structural reforms that are bolstering the real economy, crowding in private-sector activity and steering the growth model toward tradable, high-productivity sectors such as manufacturing, tourism and telecommunications.”

Meanwhile, the World Bank (WB), European Bank for Reconstruction and Development (EBRD), and the three main sovereign credit rating agencies — Standard & Poor’s, Moody’s, and Fitch — expressed cautious optimism about Egypt’s economic outlook for 2026 and 2027.

World Bank

In the Global Economic Prospects Report published in June, the WB forecast the Egyptian economy, which it classifies as a “low-middle-income” nation, would underperform its peers until 2027, despite outperforming them in 2022 and 2023.

On the plus side, the report praised Egypt’s efforts to increase its foreign exchange reserves from $46.5 billion at the start of FY 2024/2025 to more than $50 billion in October, a 20-year high.

However, it noted, “external accounts have continued to face pressure, as evidenced by the weak foreign asset position of commercial banks. In addition, the increases in U.S. import tariff rates … have raised uncertainty about prospects for exports from the region.”

The WB expects Egypt’s GDP growth rate to rise from 3.8% in FY 2024/2025 to 4.2% in FY 2025/2026, reaching 4.6% in FY 2026/2027. This growth is driven by “stronger private consumption, higher private investment … anticipated monetary easing and a gradual rebound in manufacturing activity.”

Egypt’s current account deficit should “narrow” in FY 2025/2026, “partly reflecting low oil and natural gas prices, sustained strong remittances and a vibrant tourism sector.” Additionally, the country’s “non-oil trade deficit is likely to decrease as the effects of clearing import backlogs from FY2024/25 subside.”

However, “fiscal deficits in oil import are projected to widen in 2026, partly because of Egypt’s higher interest payments and decline in non-tax revenues after a significant one-time increase from the [$35 billion Ras El Hekma deal with the U.A.E.,” the WB noted.

In 2026, this fiscal deficit should “decline slightly,” thanks to “fiscal consolidation proceeds in Egypt in FY2025/26, by implementing a reduction in energy subsidies and enhancing tax revenue mobilization efforts.”

Another challenge in 2026 will be that “poverty is … expected to remain elevated in Egypt, partly owing to persistent, though reduced, inflation, especially for food. Over [FY] 2026/2027, poverty is forecast to decline gradually … as per capita growth strengthens and inflationary pressures moderate.”

EBRD

In September, the EBRD reported GDP growth rates in countries along the eastern and southern Mediterranean coast (SEMED) “exceeded expectations in the first half of 2025, averaging 3.6%, up from 1.2% in 2024.”

For 2025, the bank forecasts the region’s GDP growth rate will increase slightly to 3.7%. Egypt’s GDP growth rate should reach 4.8%, “against the backdrop of macroeconomic stabilization and a gradual improvement in investor sentiment,” noted the report.

However, GDP growth rates may slow in 2026 for SEMED nations, including Egypt. EBRD projects SEMED’s growth rate will decrease to 3.2%, while Egypt will record 4.5%.

The EBRD attributed Egypt’s slower growth pace to ongoing risks having a larger impact on the economy in 2026 than in 2025. “Debt levels remain elevated, with servicing costs expected to absorb 65% of budget revenue in [FY] 2025/2026, while slow progress in structural reform continues to hold back potential growth.”

Also, “significant downside risks remain relating to a further escalation of regional conflicts and … a further delay in implementation of the IMF-supported reform program.”

S&P Global

In October, S&P Global upgraded Egypt’s long-term sovereign credit rating from B- to B, while keeping its short-term rating at B. That places Egypt in S&P Global’s “highly speculative” territory.

On the positive side, “Egypt’s shift to a flexible exchange rate is resulting in higher growth and increased tourism and remittance inflows,” the rating agency said. “Net financial inflows have also improved, benefiting the economy’s external position.”

The “stable outlook” reflects “Egypt’s improving growth prospects and improving balance of payments trends against continued high government deficits and debt, including external commercial obligations.”

S&P Global praised the government for achieving a primary surplus (profit before interest and debt payments) of 3.5% of GDP in FY 2024/2025. Yet, “the key challenge for public finances remains how to lower the elevated interest bill, while also extending the average maturity of domestic debt.”

The rating agency’s “upside scenario” would “consider raising … ratings if Egypt’s net government and external debt positions improve much faster than we currently expect, perhaps via an accelerated pace of deleveraging or higher FDI supported by the planned sale of state assets.”

Another positive development would be if the government “opens up key sectors to foreign investment [to] benefit the Egyptian economy, including the quality of external financing.”

Alternatively, S&P Global said its “downside scenario” would see it “revise the outlook to negative if the government’s commitment to macroeconomic reform, including exchange rate flexibility, wanes and economic imbalances such as foreign currency shortages increase again.”

S&P Global also could drop ratings “if the elevated interest costs prompt the government to undertake a debt exchange that we consider to be distressed, or if current geopolitical and tariff-related tensions impinge on Egypt’s external market access and cost of debt.”

For this fiscal year and the next, the rating agency forecasts Egypt’s government deficit will stay at 7.1% in FY 2025/2026 and fall to 6.9% by FY 2027/2028.

It also expects a simplification of the tax system, a broadening of the tax base and the elimination of tax exemptions to support fiscal revenue through fiscal 2028.

S&P Global also forecast “the more competitive exchange rate to continue to support goods and services exports, while remittances should remain strong, resulting in a gradual narrowing of the current account deficit.” However, “Egypt’s return to being a net importer of hydrocarbons [would] weigh on fiscal and external accounts.”

Government expenditures will continue to be “driven by subsidies, grants, social benefits and wages, although under the IMF program, the government has been attempting to reduce subsidies, while ending tax exemptions.”

S&P Global is optimistic the government could borrow more in 2026. “The main source of funding for the government is domestic debt bought by the Egyptian banking system, which, in our view, remains liquid in local currency, and the system can increase its lending to the government and public sector, if necessary.”

Lastly, the rating agency forecasts inflation will continue to fall, averaging 10% through 2028. That is just 1% over the central bank’s upper inflation limit of 9%.

Moody’s

Moody’s was less enthusiastic about raising Egypt’s credit rating. Its last update was in March 2024, when it upgraded Egypt’s Caa1 outlook from negative to positive. The rating indicates Egypt’s sovereign debt faces “substantial risk,” one tier below Moody’s.

Its positive outlook “reflects the prospect for an easing of Egypt’s debt service burden [and] increasing monetary policy credibility and effectiveness.” The decision came after Egypt secured the $35 billion Ras El Hekma investment agreement in February 2024.

However, that outlook depends on domestic and foreign factors. “The ongoing fiscal adjustment and structural reforms raise the prospect of a medium-term improvement in fiscal metrics and higher potential growth. However, geopolitical disruptions and social pressures could challenge the policy adjustment.”

The rating agency also noted ongoing risks, including Egypt’s high debt-to-GDP (89%), low tax and non-tax state revenue (19% of GDP), and a sizable current account deficit of 6% of GDP.

Moody’s worries that the economy’s structural rigidity, the significant role of the public sector, geopolitical pressures, and “social pressures” could hinder implementation of government structural reforms.

To achieve better scores, the ratings agency stressed the government needed to maintain its current reform path and secure more affordable internal and external financing.

Fitch

Fitch Ratings retained Egypt’s long-term foreign currency default rating at B, with a “stable” outlook, as of November 2024. The rating and outlook are similar to S&P Global.

“The rating is supported by Egypt’s relatively large economy, fairly high potential GDP growth, and strong support from bilateral and multilateral partners,” Fitch said.

However, “these factors are balanced by weak public finances, including exceptionally high debt interest/revenue, sizable external financing needs, a record of volatile commercial financing flows, high inflation and geopolitical risk.”

Fitch forecasts Egypt’s foreign currency reserves will cover 4.4 months of imports in FY 2025/2026, then decline to 4.2 months the following fiscal year, just below the B rating median of 4.3 months.

The agency also said the current account deficit would decrease from 4.2% of GDP at the end of 2025 to 2.8% in 2027, while FDI, mainly from GCC real estate investors, would grow from $13.2 billion in 2025 to $15.5 billion in 2027.

The overall government deficit will remain essentially flat in 2026 and narrow slightly by 2027, Fitch said. It cited Egypt’s “strong revenue and contained capex (capital expenditure) offset a further rise in debt interest.” Throughout the forecast period, these deficits will remain “more than double [the rating agency’s] ‘B’ median.”

Fitch also noted an increase in tax revenue from 35% of GDP in 2025 to 35.8% in 2026, “below the government plan of [36%].”

The agency predicts that while the government has met its public investment cap of EGP 1 trillion in 2025 and raised it to EGP 1.16 trillion for 2026, “maintaining restraint over a longer period could prove politically difficult.”

Regarding government finances, Fitch forecasts debt levels will fall to 77% of GDP by 2027, down from 81% in 2024. That remains “above the ‘B’ median of 50.6%.”

The rating agency also expects the debt interest-revenue ratio to decrease from 65% in 2026 to 40% in 2029, as more high-interest loans mature, replaced with low-interest debt. The projected drop still would be significantly higher than the median for other low-middle-income nations, which stands at 15%.

Fitch’s other forecasts include inflation, which it expects to remain above the Central Bank of Egypt’s upper target of 9%. The agency projects inflation to increase from 11.7% in October 2025 to 12.3% in FY 2025/2026, then fall to 10.4% in the following fiscal year.

It described short-term reforms as “moderate,” adding “structural reform to improve the business environment and competitiveness and mitigate against re-emergence of external imbalances into the medium-term has been notably weaker than measures under the IMF program to restore near-term macro-fiscal stability.”

Finally, Fitch expressed doubts about the government’s exit from economic activity, noting, “Steps have been taken to improve state-owned enterprises’ management and remove their tax privileges, but divestments have proceeded slowly.”