Egypt’s real GDP growth records 4.9% in Q1 2026
According to the bank’s Monetary Policy Report for Q1 2026, released on Sunday, the real GDP growth’s estimation is driven by certain sectors such as trade, communications, non-petroleum manufacturing and agriculture, while major contributors to the growth such as the Suez Canal and tourism show improvement and limited spillover effect.
GDP growth is expected to slow down due to tighter monetary policies which will keep prices and demand for goods controlled. It is forecasted to reach 4.9 percent in FY 2025/2026, which ends on 30 June, and 4.8 percent in FY 2026/2027. This is compared to a previous estimate of 5.1 percent and 5.5 percent, respectively.
The World Bank maintained its projections, earlier this year, for Egypt’s real GDP growth at 4.3 percent for the current fiscal year FY2025/2026 and 4.8 percent for FY2026/2027, while the International Monetary Fund (IMF) has raised its forecast for Egypt’s real GDP growth in FY2025/2026 to 4.7 percent.
The drop will be due to lower expected activity from the tourism and the Canal, while non-oil manufacturing and services will continue to support the GDP growth.
Furthermore, the country’s economy remains resilient to shocks, according to the report which includes data until 17 April 2026, due to exchange rate flexibility, and the CBE’s Monetary Policy Committee (MPC) deciding to keep its key policy rates unchanged, tightening monetary policies in its last meeting. The MPC’s next meeting falls on 21 May.
The war has caused global growth to slow down as regional volatility is causing inflationary and currency pressures, high commodity prices, inconsistent trade policy implementation, disrupted energy supply chains and caution when central banks approach monetary policies.
While the shock from the Russia-Ukraine war was driven by supply disruptions affecting gas and food markets, the current shock is driven by disturbances and closure of the Strait of Hormuz, affecting oil, gas and shipping prices, according to the report.
Inflation pressures rise
The report data indicated that Egypt's annual headline inflation in Q1 2026 reached 13.5 percent, recording pressure from the non-food sector, up from 12.3 percent in Q4 2025, according to the report. Moreover, the report showed that the country's annual core inflation also rose to 12.6 percent in Q1 2026 from 12.1 percent in Q4 2025.
Globally, the report highlighted that the slowdown of global trade activity will lower external demand, affecting exports, energy and food prices, tourism and remittances inflows, hindering Egypt’s economic growth.
The conflict’s spillover over commodity prices and transportation costs is expected to increase pressure on inflation across advanced and developing economies if the dispute persists over the medium-term.
Annual headline inflation is projected to increase in the second quarter of 2026 and to remain high throughout the year, before easing in Q1 2027. It’s expected to average between 16.0 and 17.0 percent in 2026 and between 12.0 and 13.0 percent in 2027, this is comparing to 14.1 percent in 2025.
The projections show that numbers will exceed the CBE’s target of inflation to reach 7 percent (±2 p.p.) on average in the fourth quarter of 2026, before returning to single digits in the second half of 2027.
Egypt’s external position
The balance of payments recorded a marginal deficit of $0.5 billion in Q4 2025. While the current account deficit widened by 23 percent, compared to Q4 2024, reaching $6.2 billion, taking up 1.5 percent of GDP. This was on the back of a larger trade deficit, a decrease in net investment income balance, offset by higher remittances and net service receipts from the Suez Canal and tourism.
Furthermore, the capital and financial account recorded a net inflow of $6.8 billion in Q4 2025, making it the highest level since the second quarter of 2024. This was supported by FDI and portfolio inflows, alongside commercial banks aquiring $2.4 billion in net foreign assets and an exchange rate appreciation seen in Q4 2025.
Net international reserves (NIR) reached $51.5 billion at end of December 2025, up from $49.5 billion at end of September 2025. NIRs reached $52.8 billion by March 2026 as authorities seek to stabilize the economy, maintain high levels of foreign currency reserves to meet external obligations, support the currency and manage financial volatility amid regional tensions.
Monetary sector, liquidity
M2 broad money’s growth slowed down for the fourth consecutive quarter, to average 18.5 percent in the first quarter of 2026, this is the lowest rate since Q4 2021 and less than the average of 21.5 percent in the last quarter of 2025.
Meanwhile, net foreign assets (NFAs) dropped in the first quarter of 2026 to reach $21.4 billion in March 2026, compared to $25.5 billion in December 2025. This was driven by commercial banks’ NFAs falling from $12.2 billion in Q4 2025 to $5.8 bilion by March 2026, due to foreign currency outflows in mid-February since the start of the conflict.
Loans taken out in Egyptian pound by the private sector also slowed down in pace to 7.7 precent in Q1 2026, compared to 18.8 percent the quarter before.
Excess liquidity fell to reach EGP 134.7 billion in Q1 2026, or 11.7 percent of the reserve requirement, its lowest level since Q4 2015. This is down from EGP 828.5 bilion, which was 90 percent of the reserve requirement in Q1 2025, mainly due to the net issuance of government securities.