Egypt Weighs Opportunities And Risks As Trump Starts Second Term

January 28, 2025

 

Egypt’s business landscape is closely monitoring U.S. President Donald Trump’s second term, secured with 312 electoral votes and JD Vance as vice president, as his executive decisions are expected to significantly impact monetary policy, investments, and the broader economy.

With his “America First” agenda and historical focus on private sector growth, Egypt might see both challenges and opportunities in attracting U.S. investments, adjusting to changes in global trade, and navigating shifts in international financial strategies.

The U.S. has been Egypt’s largest trade partner for years. In 2023, total trade between the two countries reached $6.9 billion, according to the American Chamber of Commerce in Egypt. In 2024, U.S. exports to Egypt totaled $5.269 billion, as reported by the U.S. Census Bureau. Notably, in October 2024, U.S. exports to Egypt hit $643 million, while imports stood at $245 million, marking a 106% increase from October 2023.

Foreign aid – high inflation

During his first term, President Trump and Egyptian President Abdel Fattah el-Sisi shared a strong and mutually beneficial relationship. “It’s a great honor to be with President El-Sisi, a friend—a great friend—of Egypt. Our relationship has never been stronger, and we’re working with Egypt on many fronts, including military and trade,” stated Trump on April 9, 2019, according to the U.S. Embassy in Egypt.

Ramona Moubarak, head of MENA Country Risk at Fitch Solutions, agreed that the two presidents share a positive rapport. “I forecast that their interactions will continue on similar terms, limiting the risk of reversing foreign aid,” she told Business Monthly.

Moubarak noted that Egypt receives over $1.3 billion in U.S. aid annually, and the good relationship between the two countries became evident when Egypt was excluded from the new administration’s temporary aid freeze policy. “This reinforces our view that Egypt’s positioning vis-à-vis the U.S. is of strategic importance,” she added.

Egypt has received more than $85 billion in bilateral foreign aid between 1946 and 2020. In FY 2020, Egypt received $1.43 billion in foreign assistance, mainly from the U.S. Agency for International Development (USAID).

Despite these positive aspects, Moubarak expressed concerns about the potential negative impact of Trump’s policies. She explained that strengthening the U.S. dollar could put downward pressure on the Egyptian pound, potentially exacerbating Egypt’s inflation rate.

Egypt faced a foreign currency crisis in early 2024. The Central Bank of Egypt (CBE)’s monetary policy committee held an emergency meeting on March 6, 2024, and decided to float the Egyptian pound on the foreign exchange markets. As a result, the pound’s value dropped from around 30.0 to over 48.0 per US dollar, aligning it with the parallel market rate. Simultaneously, the MPC raised its key interest rate by 6.0% to combat inflation.

Egypt’s headline inflation rate dropped to 23.4% in December 2024, down from 33.1% in March, marking a 9.7% decline since the currency devaluation in March 2024.

Further, the potential changes in global oil dynamics under Trump’s second term highlight how international policies can affect Egypt, as the country faces these external pressures.

Impact on oil

Earlier this month, Trump urged Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) to lower oil prices during his address at the World Economic Forum. Uncertainty over the impact of his proposed tariffs and energy policies on global economic growth and energy demand also put pressure on prices.

Moubarak highlighted that a decrease in oil prices due to Trump’s policies could harm the economies of Gulf Cooperation Council (GCC) countries, where many Egyptian expatriates work. This could limit their ability to send remittances back to Egypt, she explained.

“However, lower oil prices would still offer some benefits to Egypt, as they would lower the cost of imports and reduce the country’s subsidy expenditures,” Moubarak noted.

Remittances remain a major source of Egypt’s foreign currency. Egypt’s remittances reached $23.7 billion in the period between January to October 2024, according to the CBE.

She also cautioned that any escalation in tensions between Israel/US and Iran could have negative consequences for Egypt. “An escalation would increase Egypt’s geopolitical risk premium and energy prices, potentially forcing the country to seek additional external financing or accelerate capital outflows,” she explained. This scenario could further strain the Egyptian pound and deter foreign investment.

On January 20, 2025, President Trump declared a national energy emergency, calling for the expansion of U.S. energy infrastructure and the use of unrealized available energy resources domestically. While this move is primarily focused on the U.S., it could also have an impact on global oil prices, including those affecting Egypt.

Oil prices posted a weekly decline, ending four straight weeks of gains, after Trump announced sweeping plans to boost domestic production while demanding that OPEC moves to lower crude prices. Alexander Kuptsikevich, Chief Market Analyst at FxPro, stated, “Brent oil is steadily above $80, approaching the peak levels seen in October last year. Last week, Brent closed near its 50-week moving average, and the recent gains at the start of this week indicate strong buyer confidence, undeterred by the broader risk apprehension that is driving sell-offs in equities and bonds.”

Moubarak noted that while lower oil prices could harm oil-producing nations, they could benefit Egypt. “Lower oil prices would reduce import costs and lower the country’s subsidy expenditures,” she explained.

Mitigating impact

On the other hand, Medhat Nafei, chairman of Arab Alloys and Advisor to the Prime Minister, further elaborated on the potential benefits for Egypt. “In the last period, Egypt was a net importer of fuel, so a decrease in the price of fuel is good news for us,” he said in an interview with Business Monthly.

Nafei explained that oil exploration already costs half a trillion dollars annually, and when demand drops, companies face losses and cut production. “Given the economic slowdown, we can’t predict an increase in oil prices. The decline in global demand will have a bigger impact than the reduction in production, so fuel prices will likely decrease,” he said.

He added that the decline in oil prices could create opportunities for investments in alternative fuel sources. “We should be ready and adopt a counter-cyclical policy,” he said. To clarify, counter-cyclical fiscal measures are policies aimed at offsetting the impacts of the economic cycle.

According to an article by Ibrachy and Dermarkar law firm, there is now a greater opportunity for Egypt to increase its Liquified Natural Gas (LNG) exports, particularly to European markets. Following the U.S. election, oil prices rose due to concerns about President Trump’s potential impact on global oil supply, specifically related to his policies on Venezuela and Iran. His support for fossil fuels and the possibility of renewed sanctions on Iran could reduce the global oil supply, creating an opening for Egypt to capitalize on LNG exports.

Additionally, the article highlighted Egypt’s potential to become a manufacturing hub for Electric Vehicles (EVs) and their components. With the right investments and infrastructure, Egypt could gain a competitive edge in the growing EV market.

As President Trump begins his second term, Egypt faces a pivotal moment in shaping its economic future. With strong bilateral ties and a complex economic landscape, Egypt’s ability to navigate these pressures—driven by oil dynamics, remittances, and other factors—will determine its economic trajectory.