meed-logo

line1 line2 line3
SIGN IN / REGISTER

Egypt’s economy gets its mojo back

14 February 2025

 

Egypt’s economy is in stronger fettle than for at least a couple of years, and there is a sense of optimism about how things will transpire in 2025, even as recent pronouncements from the White House about Gaza weigh on policymakers in Cairo.

In a manifestation of that upbeat economic sentiment, Egypt in January staged a return to the international debt capital market for the first time in two years, with a $2bn issuance that was five-times oversubscribed. That was a straw in the wind that foreign investors’ concerns over the economy are finally abating.

After a battering inflicted on Egypt’s economy last year, when economic growth slipped to 2.4%, reflective of a weak currency, surging inflation and tougher public spending restrictions, analysts see a recovery in play that will drive stronger GDP growth in the coming year.

One key contributor to this improvement is the recovery in Suez Canal receipts, which dropped by about three-quarters last year after the Houthi attacks on shipping in the Red Sea. That loss of $7bn in revenues shaved off more than a percentage point from Egypt’s overall GDP growth rate, noted Moody’s Investors Service.

Growth dynamics are now improving, even if events in the region remain in flux. According to Capital Economics, there was a rise in real GDP growth to 3.5% in Q3 2024, up from 2.4% in Q2 2024. The manufacturing, transport and storage, and finance sectors were the key drivers of that improvement.

Egyptian banks are feeling the positive impact. Credit growth is reviving, with bank lending to the non-government sector growing by 2.9% in October 2024 – the fastest pace in two years.

Operating conditions for Egyptian lenders will continue improve in 2025, according to Fitch Ratings, underpinned by a sharp fall in inflation, along with an expected broadly stable currency, improved investor confidence and healthy foreign currency liquidity conditions. This should also support lower interest rates as inflation declines.

Foreign capital injection

Douglas Winslow, senior director at Fitch Ratings, says the improvement in market sentiment follows a combination of factors and is also seen in the return of non-resident inflows totalling more than $10bn into the domestic debt market since early last year.

Egypt's external finances have benefitted from Gulf state interventions, notably the UAE sovereign wealth fund ADQ’s major foreign investment in the Mediterranean resort of Ras El-Hekma, which was announced in 2024.

That deal injected $24bn of new foreign currency into Egypt, the remaining $11bn converting existing UAE foreign currency deposits held at the Central Bank of Egypt (CBE).

Saudi Arabia’s Public Investment Fund has also committed to invest $5bn in Egypt’s economy. 

Such investments, eased by the weaker Egyptian pound – rendering assets more affordable – will also help to address Egypt’s dollar shortages, and assuage residual investor concerns about default risk. 

“The huge Ras El-Hekma investment was a very important factor in the turnaround, and Fitch projects further foreign direct investment (FDI) of $7bn a year above the pre-ADQ position. The lion’s share of that is GCC investment,” says Winslow.

The $24bn of fresh foreign currency puts Egypt in a better place to move to a more flexible exchange rate. 

The combination of these factors has enabled a rapid rebuilding of Egypt’s external coffers, which was the key risk facing near-term external financing. Fitch forecasts FDI to average $16.5bn across the fiscal year ending June 2025 and fiscal year 2026, with new investment from Saudi Arabia having an impact.

Alongside the Gulf support has come multilateral financing, including from Europe. Since March 2024, an $8bn IMF Extended Fund Facility and a €7.4bn ($7.64bn) three-year EU support package have been unlocked.

Together, these capital injections will also help cover Egypt’s current account deficit, which widened to 5.4% of GDP in 2024. Inflation is also headed in the right direction, after reaching a peak of 36% in February 2024. The expectation is that inflation will have more than halved by the end of financial year 2025-26.

Strong growth upside

Looking ahead, the more optimistic prognosis foresees GDP growth accelerating to 5% in the current fiscal year. Others are more circumspect, noting the recent recovery in Suez Canal receipts is very partial and that the government still needs to implement structural economic reform measures.

Fitch Rating’s forecast for GDP growth is 4% for fiscal year 2025. A pickup in growth is already detectable.

“Growth was 3.5% in Q1 of the current fiscal year and we expect it accelerates to just above 5% in fiscal year 2026, close to our assessment of the potential and rate of the Egyptian economy. That’s partly due to further falling inflation and a positive impact on real income,” says Winslow.

Despite these stronger macro metrics, the wider credit assessment is still constrained, due to relatively weak external finances. While the central bank can call upon larger foreign exchange reserves to support the currency, Capital Economics has warned that a return to a heavily managed exchange rate would worry investors and may also call into question IMF and Gulf willingness to provide further financing.

“The IMF programme does contain some wider structural reform measures to improve private sector competitiveness, but in our view, they're not particularly far-reaching, and we're not seeing really sizeable momentum in terms of delivering in this area,” Winslow says.

There is a need for measures to stimulate private sector growth and also to improve the competitiveness of the economy, support the trade balance and reduce the current deficit over the medium term. 

“A better track record of ongoing political commitment to curbing off-budget spending pressures would also help Egypt’s rating,” says Winslow.

As to the potential for regional events to upset things, Egypt's credit fundamentals are at least better insulated from further geopolitical stress.

This, in turn, should give comfort to commercial banks in Egypt. Fitch upgraded the long-term issuer default ratings of all rated banks in November 2024, following the upgrade of Egypt’s sovereign rating.

There are other things that will need to be seen for the Egyptian economy’s recovery to sustain itself over the long-term.

“From a credit perspective, the composition of growth is equally important,” says Winslow.

“What we’ve seen in the past is that very large government off-budget megaprojects have not just led to weaker public finances, they've also contributed to external financing stress. So, what's particularly important is that the recent steps to try and better monitor and contain these off-budget infrastructure projects continues.”

MEED’s March special report on Egypt also includes:

> GOVERNMENT: Egypt is in the eye of Trump’s Gaza storm
> POWER & WATER: Egypt’s utility projects keep pace
> CONSTRUCTION: Coastal city scheme is a boon to Egypt construction

READ THE FEBRUARY MEED BUSINESS REVIEW

Trump unleashes tech opportunities; Doha achieves diplomatic prowess and economic resilience; GCC water developers eye uptick in award activity in 2025.

Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:

> WATER & WASTEWATER: Water projects require innovation
https://image.digitalinsightresearch.in/uploads/NewsArticle/13385133/main.jpg
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Chinese contractor wins Morocco solar plant deal

    10 August 2026

    China Harbour Engineering Company (CHEC), a subsidiary of China Communications Construction Company (CCCC), has won a contract to build a solar photovoltaic (PV) power plant in Fez in northern Morocco.

    Known as GreenPower Morocco 4 (GPM4), the project is being developed by Moroccan company GPM Holding through its utility-scale solar subsidiary GPM Parks.

    The project covers engineering design, equipment procurement and installation, construction of an operation and maintenance building, grid connection and commissioning. It also includes upgrades to the associated substation.

    According to CHEC, the completed plant will supply electricity to the local grid, although it did not disclose the project’s capacity or contract value. 

    The project is being developed under Law 13-09, which provides Morocco’s framework for private renewable energy generation.

    According to its website, GPM Holding is also developing another solar PV project called GreenPower Morocco 2 (GPM2). This follows the completion of its first solar project, the 34MW project (GPM1) commissioned in Tangier in 2024. 

    GPM1 was developed by Green Power Morocco, a special purpose vehicle owned by GPM Holding and UAE-based Amea Power. The $30m project covers 75 hectares and includes 91,000 PV panels. It is expected to generate about 66,149MWh a year.

    The project has a 25-year power purchase agreement in place with Amendis, a subsidiary of Veolia Morocco. PowerChina was the main engineering, procurement and construction (EPC) contractor.

    Chinese contractors have previously been involved in other projects in Morocco’s renewable energy sector.

    Shandong Electric Power Construction Company (Sepco 3), a subsidiary of PowerChina, was part of the EPC consortium for the 200MW Noor 2 concentrated solar plants and 150MW Noor 3 concentrated solar power projects at the Noor Ouarzazate complex.

    New contract awards have been limited in Morocco in 2026, although six solar PV plants are now in the execution stage under phases one and two of the 305MW Noor Atlas solar PV programme.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18263680/main.jpg
    Mark Dowdall
  • Aramco puts out fire at Jizan refinery after Houthi strike

    10 August 2026

    Saudi Aramco said it had extinguished a fire that broke out at its Jizan refinery on Saudi Arabia’s Red Sea coast after the facility was hit in drone strikes by Yemen-based Houthi rebels on 9 August.

    The kingdom’s Ministry of Energy said the fire occurred at an Aramco refinery facility in Jizan and that emergency authorities had completed the necessary procedures to deal with the incident.

    The energy ministry did not say what started the fire, saying only that the incident caused no injuries.

    The Houthi rebels later claimed responsibility for the attack.

    The province of Jizan lies close to Saudi Arabia’s border with Yemen and has repeatedly been targeted by the Houthis in attacks on the kingdom’s energy infrastructure.

    The strike on the Jizan refinery was the second attack on the facility by the Houthis in as many weeks. Aramco shut the refinery on 27 July following a similar drone strike, which, according to media reports, damaged the integrated gasification combined-cycle unit and tank farm at the complex.

    On a call with investors to discuss Aramco’s second-quarter results, CEO Amin Nasser said recent attacks on the company’s facilities in the world’s top oil-exporting country had caused some disruption to production, but that he was confident operations could be restored quickly. He said the attacks had had no material operational or financial impact.

    Jizan refinery complex

    Saudi Aramco’s sprawling Jizan refinery complex entered operations in 2021.

    Aramco undertook the estimated $16bn-plus project in late 2010. The scheme consists of a refinery with an output capacity of 400,000 barrels a day (b/d), a major marine terminal and a 4GW combined-cycle power plant in Baish, in Saudi Arabia’s southwestern Jizan region.

    The Jizan refinery covers an area of 12 square kilometres. The complex processes Arabian Heavy and Arabian Medium crude grades to produce 80 million b/d of gasoline, 250 million b/d of diesel and more than 1 million tonnes a year of petrochemical products such as benzene and paraxylene.

    A multiple-pier marine terminal supports the supply of crude oil from oil fields located mainly in the kingdom’s Eastern Province to the refinery, as well as the export of surplus refined products to overseas markets. The terminal has been designed to accommodate very large crude carriers.

    A 4,000MW combined-cycle power plant uses approximately 90,000 b/d of vacuum residue from the refinery to generate electricity, hydrogen and water for the refinery, while conveying excess power to the national grid.

    The hydrocracker unit comprises two parallel trains with a combined capacity of 54,500 b/d. The diesel hydrotreater plant comprises two trains, each with a capacity of 87,500 b/d.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18262347/main.jpg
    Indrajit Sen
  • Shamal picks Dutco for Dubai Zoo site homes

    10 August 2026

    Dubai-based Shamal Holding has awarded local contractor Dutco Construction the main construction works contract for a low-rise residential project on the site of the former Dubai Zoo in Jumeirah 1.

    The project will comprise 90 low-rise homes and is designed as a residential leasing community that will remain under Shamal’s ownership, with all homes offered for premium leasing.

    The development will retain mature trees from the former zoo and is planned around shared courtyards, landscaped open spaces and a central park. Residents will have access to a clubhouse, wellness area, children’s play area, family pool, lounge and gym.

    The architect is DXB Lab. The local H&H is the development manager for the project.

    Dutco has previously worked with Shamal on infrastructure elements of the Dubai Harbour and Dubai Harbour Marinas developments.

    Shamal’s wider real estate portfolio includes the Naia Island, Dubai Harbour and Nad Al-Sheba Gardens developments. The company also holds hospitality and leisure assets, including partnerships with Jumeirah, Hilton and Baccarat, and operates attractions such as Skydive Dubai and Deep Dive Dubai.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18262386/main.png
    Colin Foreman
  • WEBINAR: Mena Oil & Gas Projects Market 2026-27

    10 August 2026

    Webinar: Mena Oil & Gas Projects Market 2026-27 
    Thursday 27 August 2026 | 11:00 AM GST  |  Register now

    Agenda:

    • Summary of the Mena oil, gas and petrochemicals projects market 
    • Overview of major megaprojects, including project programmes
    • Analysis of active contracts and spending to date
    • Review of top contracts by work already awarded
    • Long-term capital expenditure outlays and forecasts
    • Key contracts expected to be tendered and awarded over the next 18 months
    • Leading clients, contractors and market participants
    • Spending by segment: oil, gas and petrochemicals (upstream, downstream, onshore and offshore) 
    • Audience Q&A 

    Hosted by: Indrajit Sen, MEED’s oil & gas editor

    Click here to register

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18260597/main.gif
    Indrajit Sen
  • Spanish firm renews Yanbu desalination O&M contract

    10 August 2026

    Spain’s Aqualia has announced it has renewed a contract to operate and maintain three floating desalination plants in Yanbu on Saudi Arabia’s Red Sea coast.

    The contract was awarded by the National Shipping Company of Saudi Arabia (Bahri) and will run until 14 September 2028, with an option to extend for a further two years.

    The three reverse osmosis (RO) plants are mounted on barges and have a combined production capacity of 150,000 cubic metres a day (cm/d). Each plant has a capacity of 50,000 cm/d.

    The three plants were originally deployed at Al-Shuqaiq and are designed to be relocated along Saudi Arabia’s coastline according to water demand. The barges are currently located at Yanbu.

    The $255m floating desalination project was commissioned for the Saudi Water Authority in 2022, with Bahri as the developer and UAE-based Metitio as the main contractor.

    Bahri is publicly listed on the Saudi Exchange but has significant government ownership, with the Public Investment Fund (PIF) holding 22.5% and Saudi Aramco Development Company owning 20% of the company.

    Aqualia is providing operation and maintenance services in Saudi Arabia through its joint venture Haji Abdullah Alireza Integrated Services Company (Haaisco), in which it holds a 51% stake.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18259350/main.jpg
    Mark Dowdall