Central Bank of Egypt Adjusts Inflation and Growth Forecasts Amid Economic Challenges

Central Bank of Egypt Raises Inflation Estimates

The Central Bank of Egypt has revised its inflation forecasts for the current and upcoming years, attributing the changes to increased economic pressures arising from the ongoing Iranian conflict and regional tensions. These geopolitical issues are contributing to rising energy costs and disrupting supply chains, thereby intensifying the economic challenges facing the nation.

Higher Inflation Projections

According to updated estimates, the average inflation rate for 2026 is now projected to rise to between 16% and 17%, a notable increase from previous projections of 11%. Furthermore, the bank anticipates inflation will reach 12% to 13% in 2027, up from earlier estimates of 8%. While the Central Bank expects inflation to begin a downward trend in the first quarter of 2027, potentially falling below 10% by the second quarter, it has also cautioned about potential upward risks, particularly if the Iranian conflict persists longer than anticipated or if the impacts of fiscal consolidation measures exceed expectations.

Downgraded Economic Growth Forecasts

In addition to revising its inflation forecasts, the Central Bank has lowered its growth expectations for the Egyptian economy. The growth forecast for the current fiscal year is now set at 4.9%, down from earlier estimates of 5.1%. Similarly, the projection for the next fiscal year has been adjusted to 4.8%, compared to the previous estimate of 5.5%. This adjustment reflects the ongoing tensions between Iran and the United States, which are expected to impact economic conditions until the end of 2026.

Factors Contributing to Growth Decline

The bank attributes the reduced growth projections to several factors. A major concern is the anticipated decline in tourism contributions due to the closure of airspace in the region. Additionally, the Suez Canal has also seen a decrease in contributions, with a recovery in shipping traffic now expected only in the first quarter of 2027. Rising energy costs have further contributed to a slowdown in global economic activity.

Despite these challenges, the Central Bank remains optimistic that certain sectors will continue to support economic growth. The non-oil manufacturing industries and the services sector are expected to bolster GDP growth in the coming period. Moreover, improvements in extraction activities, driven by both land and offshore discoveries, are likely to enhance oil and gas production in the medium term.

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