Egypt's real gross domestic product (GDP) growth will accelerate to 4% in fiscal year (FY) 2025 from 2.4% in FY 2024, helped by recovering confidence, global rating agency Fitch said.

GDP growth will rise to 4.7% in FY 2026 on strengthening real income growth, but slightly below the potential growth rate. 

The government is firmly committed to the International Monetary Fund (IMF) programme, which has focussed on restoring macro-fiscal stability. However, there has been more limited structural reform to boost competitiveness and avoid the re-emergence of external imbalances in the medium term. 

Progress includes tax system rationalisation, reduced state-owned enterprises tax exemptions and improved customs processes, whereas state divestment has been modest.

Fitch, however, has affirmed Egypt's long-term foreign-currency issuer default rating at "B", with a stable outlook.

The government deficit is expected to widen by four percentage points in FY 2025 to 7.4% of GDP due to last year's 3.3% of GDP one-off Ras El-Hekma revenue and high debt interest costs. 

The main economic impact from ongoing regional conflicts has depressed Suez Canal receipts, which Fitch projects will only partially recover in FY 2026 to 60% of their 2023 level. 

The rating agency said that further escalation of conflict is a moderate risk to tourism revenue, which has been resilient, up 5% in FY 2024 and projected to rise by 9% in FY 2026.  

(Editing by Seban Scaria Seban.scaria@lseg.com)