Arab Finance: Economic growth in Egypt is forecast to slow slightly at 4.0% in 2026 before accelerating to 5.0% in 2027, according to the latest Allianz Research’s Economic Outlook 2026–2027.

This places Egypt among the more stable performers in a region where overall Middle East growth is projected to contract by -1.0% in 2026 due to the ongoing US-Iran conflict.

Egypt’s fiscal balance is expected to remain under strain at -10.7% of gross domestic product (GDP) and the current account deficit at -4.3% of GDP, as the country is exposed to external shocks amid regional tensions, Allianz adds in its report.

While the North African country’s energy balance is broadly neutral at 0.0% of GDP, its overall vulnerability to energy price shocks is assessed as “medium,” with a “high” exposure to Middle East supply disruptions.

Since the escalation of the conflict, the Egyptian pound has come under significant pressure. Hence, the report highlights that the foreign exchange (FX) recorded a 9% depreciation against the US dollar since February 27th. At the same time, bond yields have risen by 51 basis points.

The report also shows that FX reserves remain relatively limited at 4.3 months of import cover. It also flags a negative FX outlook and a high risk of fiscal slippage throughout 2026.

Moreover, inflation in Egypt is projected to gradually decline over the coming years. After peaking at 14.1% in 2024 and hitting 11.9% in 2025, inflation is forecast to fall to 11.0% in 2026 and further to 8.0% in 2027, as per the report.

In response to these pressures, Allianz expects the Central Bank of Egypt (CBE) to maintain a “on hold” monetary stance through mid-2026 to balance inflation concerns.

Last month, Minister of Planning and Economic Development Ahmed Rostom said that Egypt’s economic growth is projected to reach between 4.9% and 5.1% in fiscal year (FY) 2025/2026 due to current regional tensions.

In its fourth-quarter 2025 report on Egypt, French multinational universal bank BNP Paribas expected that Egypt’s real GDP would rise by 5.2% during FY2025/2026.

It is worth noting that the state’s economy grew to 5.3% in the second quarter (Q2) of FY2025/2026, marking its highest growth since Q3 FY2021/2022.