Is Egypt’s Economy Improving? A Look at the Key Factors

Egypt’s economic trajectory is a subject of considerable interest, reflecting its standing as a prominent economy in the Middle East and North Africa. The nation has embarked on various reforms and initiatives to stabilize and enhance its financial landscape. Understanding the current economic performance involves examining several indicators, government actions, and external influences.

Key Economic Indicators

Gross Domestic Product (GDP) growth provides insight into the overall economic output. Egypt’s GDP expanded by 4.77% in the first quarter of 2025 compared to the previous year, with projections indicating a 4.00% growth by the end of the current quarter. GDP growth recovered to 3.5% in Q1 FY 2024/25, up from 2.7% in Q1 FY 2023/24, and further to 4.3% in Q2 FY 2024/25, compared to 2.3% in the same quarter of the prior fiscal year.

Inflation rates measure the pace of rising prices for goods and services. Egypt’s annual urban inflation rate reached 14.90% in June 2025, a decrease from 16.80% in May of the same year. Core inflation, which excludes volatile items, decreased to 11.40% in June 2025. Projections suggest the inflation rate will trend around 12.00% in 2026 and 10.00% in 2027.

Unemployment rates indicate the percentage of the labor force actively seeking employment. Egypt’s unemployment rate decreased to 6.30% in the first quarter of 2025, down from 6.40% in the fourth quarter of 2024. This represents the lowest rate on record. Youth unemployment (ages 15-29) was 14.9% in 2024, a 1.0 percentage point decrease from 2023.

Foreign exchange reserves represent the foreign assets held by a country’s central bank. Egypt’s foreign exchange reserves increased to $48.7 billion in June 2025, up from $48.53 billion in May of the same year. This marks an all-time high for the country’s reserves. These reserves are composed of gold, specific currencies, special drawing rights, and marketable securities denominated in foreign currencies.

The national debt situation reflects the total financial obligations of the government. Egypt’s National Government Debt reached $261.9 billion in June 2024, a decrease from $313.9 billion in the previous quarter. The government aims to reduce the external debt-to-GDP ratio to about 88% in FY2024/2025 and below 80% by FY2026/2027.

Government Policy Initiatives

The Egyptian government has implemented a series of economic policies and reforms to foster economic improvement, focusing on financial, monetary, and structural reforms. These initiatives aim to achieve sustainable growth and enhance the economy’s flexibility and diversification.

Fiscal reforms have been a significant area of focus. The government has worked to overhaul the tax system, including introducing a unified tax regime for small and medium-sized enterprises. The 2024/25 budget includes tax reforms, such as digitalization of collection, which are expected to increase revenue. The government also aims to achieve a primary surplus of 3.5–4% of GDP and reform untargeted subsidies.

Monetary policy adjustments by the Central Bank of Egypt (CBE) have been used to manage inflation and stabilize the currency. The CBE recently cut its benchmark overnight deposit rate and overnight lending rate. These rate cuts signal a shift toward monetary easing as inflationary pressures have shown signs of abating. The CBE aims to guide inflation toward a medium-term target of 7% (± two percent by Q4 2026).

Structural reforms are aimed at increasing the private sector’s contribution to GDP and attracting investment. The government is regulating state ownership and restructuring economic bodies. Efforts to improve the business environment include streamlining procedures, reducing bureaucratic hurdles, and enhancing transparency. The “golden license” has been granted to 46 companies by March 2025, providing incentives for investment. Privatization of state-owned companies is also a key component of these reforms, with the IMF program requiring Egypt to divest more of these enterprises.

Pillars of the Economy

Tourism is a major income source and a significant contributor to the national economy. The sector’s contribution to Egypt’s GDP reached EGP 1.4 trillion in 2024, accounting for 8.5% of the national economy, with projections to surpass this in 2025. The sector supported 2.7 million jobs in 2024, exceeding 2019 levels, with a forecast to rise to 2.9 million in 2025.

Suez Canal revenues are another important economic pillar. The Suez Canal, one of the world’s most significant shipping routes, generates substantial revenue for Egypt through tolls. The Suez Canal Economic Zone (SCZONE) reported a 38% year-on-year increase in revenue for the fiscal year 2024/25, reaching 11.43 billion Egyptian pounds ($234 million). This growth occurred despite a 54.1% drop in Suez Canal revenues to $2.6 billion between July 2024 and March 2025, due to Red Sea tensions.

Remittances from Egyptians working abroad are a substantial source of foreign currency. Remittances reached $29.4 billion over a ten-month period from July 2024 to April 2025, an increase of 77.1% compared to the same period in the previous year. In April 2025 alone, remittances jumped by 39% to $3 billion. This surge in remittances is attributed to increased confidence in the banking system following a market-based currency exchange rate adjustment in March 2024.

The energy sector, encompassing oil and gas, plays a considerable role in Egypt’s economy. The sector represents 13.1% of overall GDP. Egypt is a major producer of natural gas in Africa. The country has initiated reforms to gradually reduce electricity subsidies and promote renewable energy production, aiming for renewables to contribute 42% of the electricity mix by 2035. While fossil fuels still dominate electricity generation at 88% in 2023, wind and solar energy have expanded to 5% of electricity generation in 2023, up from 1% in 2015.

Manufacturing and agriculture also contribute to the economic landscape. The manufacturing industries sector contributed 16% to GDP in FY 2022/23, and agriculture contributed 11%. The agricultural sector is a fundamental pillar, contributing about 15% to GDP and absorbing over 25% of the workforce. Food, beverage, tobacco, and textile industries are the largest segments within agricultural manufacturing, representing about 83.58% of the total output in this area between 1997 and 2018.

Global and Regional Factors

Global commodity prices, particularly for energy and food, significantly influence Egypt’s economic performance. As a net importer of many essential goods, Egypt is susceptible to fluctuations in global prices. The Russian-Ukrainian war, for instance, led to increased wheat prices, impacting Egypt, which imports a substantial portion of its wheat from these countries. This has contributed to higher import costs and inflationary pressures.

International investment trends also play a role in Egypt’s economy. Foreign Direct Investment (FDI) inflows were $9.84 billion in 2023. Egypt continues to attract FDI, with net flows reaching $22.4 billion in June 2024. The government’s economic reforms and a flexible exchange rate are expected to lead to increased FDI over the long term. Egypt was the ninth-largest recipient of foreign investment globally in 2024, attracting $47 billion.

Geopolitical events in the region can either support or hinder Egypt’s economic trajectory. Conflicts, such as the Israeli-Palestinian war and other regional instabilities, have led to increased security expenditures and disrupted trade routes, impacting tourism and Suez Canal revenues. The perception of insecurity in neighboring countries has deterred international visitors, leading to a decline in tourist arrivals. These events also affect oil prices and supply chains, increasing the cost of imported goods.