| Recent macroeconomic and financial developments Egypt’s GDP growth declined to 3.8% in 2022/23, reflecting low performances in manufacturing and petroleum refining. Growth was propelled by private consumption and exports, despite high inflation. At 24% in 2022/23, inflation was well above the Central Bank of Egypt’s (CBE) target of 7%, driven by rising international prices, domestic supply shocks, and exchange rate movements. The Egyptian pound lost 70% of its value against the US dollar between May 2022 and January 2023. To curb inflationary pressures, the CBE increased interest rates three times between March and August 2023. The fiscal deficit decreased slightly to 6.0% of GDP in 2022/23, buoyed by higher tax revenues that raised the primary surplus to an estimated 1.6% of GDP. Central government debt increased to 95.7% of GDP in 2022/23, due largely to the devaluation of the Egyptian pound. The current account deficit narrowed to 1.2% of GDP in 2022/23 thanks to higher tourism receipts and Suez Canal revenues. Gross official reserves recovered slightly to $34.8 billion at the end of June 2023 (5.6 months of import cover). The banking system remained well capitalized, at above the CBE’s minimum threshold of 12.5%. Nonperforming loans improved from 3.4% in 2022 to 3% of gross loans in 2023. Government expenditures on subsidies and social protection programs increased to 20.4% of total expenditures in 2022/23 to reduce the impact of high inflation on households’ purchasing power. Despite these measures, the poverty rate, estimated at 29.7% in 2020, is expected to increase. Unemployment remained stable at an estimated 6.9% in 2023. |
| Outlook and risks Egypt’s economic outlook is positive, thanks to the strong financial support of international financial institutions and development partners. Egypt signed a $35 billion deal with the United Arab Emirates in February 2024 to develop the North Coast area of Egypt (Ras El Hekma). GDP growth is expected to decline slightly to 3.3% in 2023/24 before rising to 4.5% in 2024/25 within a more favourable economic context. The fiscal deficit is set to widen in 2023/24 due to higher interest payments but is then projected to improve in 2024/25. Inflation is expected to rise to 35.8% in 2023/24 before moderating to 22.7% in 2024/25 due to exchange rate movements. The current account deficit is projected to deteriorate slightly as tourism receipts and Suez Canal revenues decline. In the short term, Egypt remains vulnerable to global economic shocks, notably the war in Gaza, which poses a security risk in the Red Sea and could impair tourism receipts and Suez Canal revenues. |
| Reform of the global financial architecture The structure of the Egyptian economy remained unchanged over the period 2012–2022, dominated by services (51% of GDP) and industries (34%). Manufacturing, estimated at 16.3% of GDP for the same period, has not yet emerged as an engine of structural transformation. Although employment in agriculture decreased by 9 percentage points over the period, employment shares in agriculture (19%) and services (53%) in 2022 remained higher than their output shares, indicating low productivity. The Egyptian economy benefits from a large consumer base, diversified economy, strategic geopolitical location, and several free trade agreements. However, structural transformation is impeded by slow private sector growth. Creating an enabling environment for private sector development requires substantial public investment and additional resources, while Egypt is looking to reduce its public debt and interest service. Egypt could continue lengthening the maturity of its debt and diversifying its investor base to manage its refinancing needs. Reform of the global financial architecture, notably the proposal to increase development lending and improve terms of lending, could support Egypt’s structural transformation and economic resilience. Egypt has always benefited from strong support from international financial institutions. A strategic partnership worth $8 billion was signed with the European Commission in March 2024, while the $3 billion International Monetary Fund program approved in December 2022 was increased to about $8 billion. |