Egypt’s economic recovery is a beacon of hope

Egypt closed 2025 as the best-performing equity market in the Middle East and North Africa region, with impressive gains of over 40 percent. This growth stands in stark contrast to the dire economic conditions the country faced just a year earlier. The performance marks a significant turning point for not only Egypt but also the entire MENA region. Amid a global economic environment fraught with oil price volatility and monetary tightening, Egypt’s recovery has been remarkable, offering an alternative view of an economy that has faced significant challenges over past decades.

Egypt’s economic challenges peaked between 2022 and 2023, with inflation surging from 13.9 percent in 2022 to almost 34 percent in 2023. This, coupled with external financing constraints and a sharp depreciation of the Egyptian pound, put immense pressure on the economy. Geopolitical instability, particularly the Gaza conflict, further exacerbated the situation. Despite these challenges, Egypt’s economic performance in 2025 stands out as particularly impressive, considering the volatile global environment.

Amid these hardships and growing reluctance from international lenders, Egypt’s government made efforts to implement reforms, including structural changes aimed at improving the business environment and attracting foreign investment. In late 2024 and early 2025, signs of recovery emerged as inflation subsided, the currency stabilized, and business conditions began improving. By the first quarter of the 2025-26 fiscal year, Egypt had reported gross domestic product growth of 5.3 percent, a significant rise from the previous year’s 3.5 percent. These early indicators signaled a new chapter for the country’s economy.

Building on these initial promising signs, Egypt soon saw positive developments ripple across crucial sectors, reinforcing optimism around its economic future.

The country’s mergers and acquisitions market surged from 97 deals in 2023 to 120 deals the following year — a 23.7 percent year-on-year increase, the highest in the Middle East. This boost in M&A activity was driven by the country’s economic reforms, privatization efforts, and increased foreign investment.

Egypt’s real estate sector has been a cornerstone of its economic recovery, fueled by the Vision 2030 plan. Major projects such as the New Administrative Capital, new cities, and high-speed rail development have driven growth, with the construction sector expanding at 7.4 percent annually. In tourism, Egypt welcomed almost 19 million visitors in 2025, a 21 percent increase from the previous year, highlighting its role as a cultural hub and reflecting the country’s stability amid regional tensions.

Additionally, Egypt’s energy sector, with its vast oil reserves and emphasis on renewable sources, has been key to the country’s growth, aiming for 42 percent of energy from renewables by 2030.  Egypt is also a key energy exporter to Africa and Europe, positioning the country as a central energy leader in the region. These sectors have collectively strengthened Egypt’s recovery and economic strength.

In terms of technological development, Egypt’s Digital Egypt strategy is increasingly pivotal in shaping the country’s future. As part of Vision 2030, this initiative focuses on enhancing digital infrastructure and fostering artificial intelligence across various sectors. The rapid growth of electronic payments and other digital services, especially within the SME sector, has been one of the most visible outcomes. This digital transformation has supported economic recovery and positioned Egypt as a regional tech hub, further attracting investment.

The country’s ability to bounce back speaks to its resilience.

Zaid M. Belbagi

Looking to the future, Egypt’s economic outlook remains positive. With a predicted GDP growth rate of 4.7 percent for 2025-26, the country’s performance is expected to continue its upward trajectory, surpassing the International Monetary Fund’s previous forecast of 4.1 percent. The country is benefiting from a weaker US dollar, which has increased the appeal of Egyptian risk assets. Furthermore, lower oil prices have eased concerns over the country’s external accounts and provided a favorable inflation outlook.

However, despite these positive developments, Egypt continues to face significant challenges, particularly in attracting sustained foreign investment. While the country has seen notable foreign direct investment from the UAE and Qatar, two of its major investors, its weight in global economic indices remains relatively small. The UAE’s commitment of $35 billion via the 2024 Ras El-Hekma deal, which helped boost Egypt’s total FDI to $47 billion that year, and Qatar’s cumulative investments of $3.2 billion in 266 companies, with an additional $7.5 billion planned, including a $29.7 billion North Coast project, are critical contributions. Egypt is also one of the major recipients of US investments, further highlighting its attractiveness as a strategic partner.

Despite these external flows of capital, liquidity in the domestic market remains thin, and foreign investor interest has yet to reach its full potential. The country’s unemployment rate reached 6.4 percent in 2025, leaving about 2.2 million people unemployed. Labor force participation remains low, at around 44 percent, with more than 60 percent of jobs in the informal sector lacking stability or security. This dynamic highlights that while foreign direct investment is vital to Egypt’s economic recovery, it cannot serve as the sole driver. The country’s long-term economic stability hinges on the implementation of deeper structural reforms that address internal challenges and create a more resilient economic foundation.

Without these critical reforms, Egypt risks falling into a cyclical pattern where periods of economic growth are followed by contraction, rather than achieving long-term stability.

That said, Egypt’s progress in sectors such as construction, energy, and tourism, along with the continued implementation of Vision 2030, offers significant long-term growth potential. While challenges remain, the country’s economic trajectory appears promising, with the foundations for a more diversified, resilient economy being steadily built.

In conclusion, Egypt’s remarkable recovery in 2025 is not only a triumph for the country but also a beacon of hope for the MENA region. The country’s ability to bounce back from a period of severe economic distress speaks to its resilience, the effectiveness of its reforms, and the opportunities that lie ahead. With continued strategic investment and a focus on sustainability and innovation, Egypt is well-positioned for sustained growth in the years to come.

• Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the Gulf Cooperation Council. X: @Moulay_Zaid