Fitch Solutions revises down Egypt real GDP growth to 3.7% over Suez Canal disruption
In its report, Fitch attributed this revision to the weaker performance in the fourth quarter (Q4) of FY2023/2024, which ended on 30 June 2024, and the ongoing disruptions in the Suez Canal.
The report noted that the country’s economy is recovering; however, the pace is slower than previously projected.
The Egyptian economy has lost $8 billion as a result of the significant drop in the Suez Canal revenues amid the ongoing Middle East conflicts, mainly the Israeli aggression against Gaza and Lebanon, the country’s Minister of Foreign Affairs Badr Abdelatty revealed in November.
Following the conclusion of its mission to Egypt for the fourth review of the Extended Fund Facility programme in November, the International Monetary Fund (IMF) stressed that the ongoing regional geopolitical tensions make the economic outlook for the region, including Egypt, challenging.
“Spillovers from the conflicts in Gaza and Israel and trade disruptions in the Red Sea continue to negatively affect sentiment and cause substantial declines of up to 70 percent in Suez Canal receipts, a significant foreign currency source for Egypt. In addition, an increasing number of refugees is adding to fiscal pressures on public services, especially health and education,” according to IMF Mission Chief to Egypt Ivanna Vladkova Hollar.
Despite these challenges, Fitch's report projected that a rebound in non-oil exports and increased investment would maintain growth above the 2.4 percent rate recorded in FY2023/2024.
The report expected Egypt’s real GDP growth to increase from the earlier forecast of 4.7 percent to 5.1 percent in FY2025/2026, which starts on 1 July 2025.
According to the report, this optimism is based on the anticipated normalization of navigation in the Red Sea and improved services sector performance, attributed to decreasing geopolitical risks.
Furthermore, the report anticipated vigorous investment activity, driven by foreign investment and lower borrowing costs, which will bolster economic performance in the future.