Would Egypt reassess gov’t 3-year action plan amid uncertainty globally?
However, experts assume that these targets remain subject to reassessment and revision should local or international conditions change, especially with Donald Trump taking office as the new US president.
The still-existing implications of the Russian-Ukrainian war, the regional tense situation, the protectionist measures taken by Trump, and the retaliatory measures that the European and Asian countries could take represent major challenges that could necessitate reconsidering the key targets in the government action plan through FY2026/2027
Economic challenges and external influences
Medhat Nafei, an economic expert and member of one of the cabinet's advisory committees, explained to AO that the targets set in the programme until FY2026/2027 were based on the prevailing conditions in the Middle East and worldwide.
He expressed hope for stability in the coming period, warning that any escalation in tensions could lead to different scenarios that the government must consider when evaluating their impact on its economic objectives.
Decline in Suez Canal revenues
Nafei highlighted that the Suez Canal has witnessed a significant decline in revenues due to security tensions in the Red Sea, exacerbated by the start of the Israeli war on Gaza in 2023. This has clearly impacted foreign currency inflows to the country.
According to the Ministry of Planning, Economic Development, and International Cooperation, Suez Canal activity fell by 68.4 percent in the first quarter (Q1) of FY2024/2025, reflecting the repercussions of geopolitical instability.
Potential impact of US trade war
Nafei also pointed out the US-led trade conflict, which could negatively affect global trade volumes and potentially lead to a decline in exports — one of Egypt’s key sources of foreign exchange and a major driver of its GDP growth.
As outlined in its action plan, the government targets securing £130 billion in exports by FY2026/2027.
Moreover, he explained that Egypt’s GDP is primarily driven by consumption, which accounts for approximately 85 percent of the total GDP, alongside investment, government spending, and the trade balance.
However, the trade balance typically records a deficit due to the higher value of imports than exports.
Nafei further emphasized that greater stability in the Middle East is necessary to attract investment. Given its strategic location and trade agreements with numerous countries, Egypt remains an attractive destination for foreign capital.
Role of tourism in development
The government targets an increase in inbound tourists to 17.8 million by FY2026/2027. However, Nafei stressed that tourists' spending power is more significant than the total number of visitors.
This underscores the need to expand hotel capacity and infrastructure to accommodate tourists who spend more. One suggested approach is to use vacant residential units as temporary hotel accommodations, which could quickly provide additional rooms.
The government plans to expand hotel capacity from 250,000 to 500,000 rooms over the coming years.
Furthermore, Egypt will open the Grand Egyptian Museum on 3 July, a move expected to boost cultural tourism significantly. On average, cultural tourists spend three times more than beach tourists.
As set in its work programme, the government anticipates $17.1 billion in tourism revenues by FY2026/2027.
Growth rate targets and economic outlook
Farag Abdullah, an economist and member of the Egyptian Association for Political Economy, told AO that the government targets an annual growth rate of 5.5 percent by FY2026/2027.
According to the planning ministry, GDP growth reached 3.5 percent in the Q1 of FY2024/2025, compared to 2.7 percent in the corresponding period of FY2023/2024.
Abdullah noted that growth forecasts typically extend for up to 10 years but remain subject to periodic reassessment based on evolving economic conditions.
He added that Egypt’s growth target aligns with those of emerging economies, where growth rates typically range between 4.5 percent and 7.5 percent. In contrast, developed economies' average growth is around 2.5 percent.
Unemployment and budget deficit reduction
Abdullah emphasized that strong economic growth contributes to reducing unemployment rates. He noted that the current unemployment rate is promising and is expected to decline further with sustained economic expansion.
According to the latest figures from the Central Agency for Public Mobilization and Statistics (CAPMAS), unemployment fell from 6.7 percent in 2023 to 6.4 percent in Q3 of 2024.
The government also strives for sustained real GDP growth to enhance tax revenues, public spending efficiency, and overall fiscal health. It aims to reduce the budget deficit to 6.6 percent of GDP by FY2026/2027.