Arab News: Egypt’s economy is expected to grow 5 percent in fiscal 2026/27, while inflation is forecast to average 14.4 percent this year, delaying interest rate cuts until 2027, a new analysis showed.
BMI, a Fitch Solutions company, lowered its fiscal 2026/27 growth forecast from 5.2 percent, citing rising regional risks, while maintaining that the revised estimate would still mark the Egyptian economy’s strongest expansion in four years.
Despite the downgrade, growth is expected to be supported by public investment, exports, agriculture and recovering natural gas production, helping offset higher input costs and weaker regional sentiment.
Egypt’s economy has shown signs of stabilizing after the International Monetary Fund last week completed the latest review of its reform program, unlocking about $1.8 billion in financing and citing progress in restoring macroeconomic stability through exchange-rate flexibility and tighter fiscal and monetary policies.
“We forecast inflation at 14.4 percent in 2026 and 10.8 percent in 2027, reflecting higher oil prices, a likely fuel price hike and pound weakness,” BMI said in its latest analysis.
The outlook follows the latest inflation data from the Central Bank of Egypt, which showed annual headline inflation eased to 14.3 percent in June from 16.5 percent in May, while monthly inflation fell 0.4 percent. The central bank attributed the slowdown to a favorable base effect, lower food prices and easing core inflationary pressures.
Pound to stay volatile
On the currency front, BMI maintained its forecast for the Egyptian pound to trade between 47 and 51 per US dollar but said it is likely to remain in the weaker half of that range through the second half of 2026. It also warned the currency could weaken to 50-55 pounds per dollar if geopolitical tensions escalate.
The Central Bank of Egypt is expected to hold its policy rate corridor at 19-20 percent for the rest of 2026 before cutting rates by 400 basis points in 2027, with easing potentially starting only in April or May.
BMI said portfolio flows and the pound will remain volatile in the coming months, though record reserves and greater exchange-rate flexibility reduce the risk of a disorderly adjustment. The firm’s base case for the US-Iran conflict envisages messy negotiations, intermittent military exchanges and a tentative, stop-start reopening of the Strait of Hormuz later in the third quarter of 2026.
https://www.arabnews.com/node/2653100/business-economy
