EBRD forecasts moderate growth rise for Tunisia and Egypt in 2025

The European Bank for Reconstruction and Development (EBRD) has adjusted Egypt’s economic growth projection upward, anticipating a 4% increase in FY2024/2025, indicating a positive recovery trajectory. Growth for FY2023/2024 was revised to 2.7%, with GDP expansion expected to reach 3.2% in 2024 and 4.5% in 2025.

Inflationary pressures have moderated, with inflation declining to 25.7% in July 2024, down from a peak of 38% in September 2023. This easing is underpinned by robust performance in key sectors such as retail, agriculture, telecommunications, and real estate, although contractions were observed in the gas and non-oil manufacturing industries. The Egyptian pound’s devaluation in March 2024 bolstered external accounts, and foreign exchange reserves reached a five-year high, enhancing macroeconomic stability and resilience to external shocks.

Nonetheless, the EBRD highlighted persistent risks, including structural delays in the energy sector and interruptions in the implementation of IMF-mandated reforms, which may impede sustained economic expansion. Fitch Solutions has also forecasted a 4.2% growth for FY2024/2025, driven by a resurgence in investment flows and a recovery in the manufacturing sector, with additional support anticipated following the resolution of the Gaza conflict by late 2024.

In Tunisia, economic growth is projected at 1.2% in 2024 and 1.8% in 2025, supported by subdued inflation, a shrinking current account deficit, and continued reform efforts. Expansions in tourism, financial services, and industrial output helped offset contractions in agriculture and mining. However, Tunisia’s constrained fiscal capacity and high external debt remain critical vulnerabilities. Inflation fell to a 30-month low of 7% in July 2024, boosting domestic demand and export performance.

Overall, both Egypt and Tunisia are navigating complex economic landscapes, with opportunities for growth tempered by structural challenges and external risks. The successful implementation of reforms and effective management of fiscal and monetary policies will be crucial for sustaining economic momentum in the coming years.