World Bank lowers Egypt’s growth forecast again

Alex Azabache/Unsplash

• Prediction of only 2.8% growth
• Country recently got $60bn funding
• Third cut this year to growth forecast

The World Bank has downgraded Egypt’s growth forecast for the current fiscal year to 2.8 percent, the lowest for 11 years, despite recent investment in the country of nearly $60 billion.

In its latest Middle East and North Africa economic update, the bank blamed “sluggish industrial sector performance” and the effects of war in the region for the cut of 0.7 percentage points in its prediction for Egypt’s growth.

It is the third time this financial year that the bank has lowered its forecasts for Egypt’s growth. The bank predicts growth rebounding in 2024-25 to 4.2 percent.

---

---

Of all the economies in the Mena region, the bank said, Egypt “could suffer the largest fiscal effects from the combined effects of the Suez Canal crisis and the conflict in the Middle East, as a result of lower fiscal revenues and tourism receipts.”

The impact will be much greater, the bank warned, “if fighting were to worsen or continue for a protracted period.”

• EU to provide ‘urgent’ $1bn short-term aid to Egypt

• What Egypt needs to do to please its $60bn backers

• Military’s role in economy muddies Egypt’s debt plan

It also said that Egypt’s budget deficit would widen from 6 percent to 6.5 percent “as tax revenue shrinks from a slowing economy while interest payments rise because of a devalued currency and monetary tightening.”

The Middle East’s economy as a whole is likely to rebound slightly this year, the bank said, reaching pre-pandemic levels of 2.7 percent growth, despite rising debts and growing uncertainty surrounding the war in Gaza.

In a separate report titled Macro Poverty Outlook for Egypt, the bank forecast that Egypt’s debt-to-GDP ratio would rise to 97.6 percent as a result of a currency devaluation in March that saw the Egyptian pound slide 36 percent against the US dollar.

The report also pointed to a large backlog of foreign currency payments owed to oil companies and import/exporters.

Despite challenges, the bank said, the $35 billion deal struck between the UAE sovereign wealth fund ADQ and the Egyptian government, which was followed by a series of multilateral funding announcements, “will gradually alleviate the foreign currency crisis.”

In recent weeks Egypt has been promised nearly $60 billion in new funding and investments from the International Monetary Fund, the World Bank and the European Union.

Egypt’s tourism sector, meanwhile, has held up well in the face of geopolitical threats from the Gaza conflict. The number of tourists visiting Egypt increased by 5 percent year on year in the first 40 days of 2024, Egypt’s tourism minister, Ahmed Issa, said in February.