IMF slightly trims Egypt's growth forecast amid global trade shifts - Economy
The revised forecast now stands at 4.1 percent, down from its April estimate of 4.3 percent.
The report, an updated version of the World Economic Outlook (WEO) released on Tuesday, did not elaborate on the specific reasons behind this revision.
The IMF said in July that it will combine the fifth and sixth reviews of Egypt's ongoing $8 billion loan programme, with both slated for completion in December.
The fifth review was primarily scheduled to be completed in June, yet the implications for the regional geopolitical tensions impeded that.
At the regional level, the IMF projects that the Middle East and Central Asia will experience an uptick in growth, reaching 3.4 percent in 2025 and 3.5 percent in 2026, reflecting a broader stabilisation following recent economic pressures.
Global growth slows, but revisions improve 2025 outlook
On a global scale, the Fund anticipates modest deceleration in economic growth over the coming years, forecasting three percent growth in 2025 and 3.1 percent in 2026.
These figures fall below both the 2024 estimate of 3.3 percent and the pre-pandemic average of 3.7 percent, indicating a shift back to slower long-term trend growth.
Despite the overall slowdown, the IMF upgraded its 2025 global growth forecast from the April outlook, driven by stronger-than-expected international trade, a lower effective global tariff rate, and improved global financial conditions.
Countries, including China, saw some of the most notable upward revisions.
Trade activity boosts short-term forecasts, but raises 2026 risks
The report highlights a short-term boost from front-loading of trade flows amid elevated policy uncertainty and expectations of trade restrictions.
As a result, global trade volume for 2025 was revised upward by 0.9 percent.
However, the report expected this offset to fade in the second half of 2025, with a projected 'payback' effect in 2026, leading to a 0.6 percent downward revision in global trade for that year.
According to the WEO, the weaker US dollar is magnifying the impact of tariffs on the country's trade balances rather than offsetting it.
While tariffs are positively affecting the US current account, their impact is being more than neutralised by the government's expansionary fiscal stance.
Medium-term outlooks suggest that fiscal stimulus in current account surplus economies may help reduce global imbalances.
Disinflation Trend continues globally
Global inflation continues on a downward trajectory, with headline inflation projected to fall to 4.2 percent in 2025 and 3.6 percent in 2026, broadly unchanged from the April WEO.
This is attributed to cooling demand and lower energy prices, although regional variations persist.
In the US, tariffs are acting as a supply-side shock, gradually feeding into consumer prices and pushing inflation above the Federal Reserve's two percent target through 2026.
Meanwhile, inflation in the euro area is expected to ease due to currency appreciation and one-off fiscal policies.
In China, core inflation was revised slightly upward, reflecting higher-than-expected recent readings.
Downside risks still overshadow outlook
The report asserted that downside risks continue to dominate. The fragile trade policy balance could be disrupted by escalating protectionism.
If the tariff levels proposed by the US administration, including up to 50 percent on copper, are implemented, global growth could decline by around 0.2 percent in 2025.
Additional sectoral tariffs, particularly in electronics and pharmaceuticals, and nontariff barriers targeting key inputs may result in supply chain disruptions and heightened inflationary pressures.
Even without new measures, trade policy uncertainty could discourage investment, especially in export-driven economies.
Moreover, rising geopolitical tensions, particularly in the Middle East and Ukraine, pose further threats by potentially introducing supply shocks, disrupting shipping routes, and driving up commodity prices.
This scenario would likely weigh on growth and rekindle inflation, placing central banks in more difficult policy positions.
As per the report, fiscal vulnerabilities are also a concern. Countries like Brazil, France, and the US are running large fiscal deficits alongside historically high public debt, potentially tightening global financial conditions and increasing market volatility, especially if concerns about Us fiscal sustainability and the dollar's role in the global monetary system escalate.
Moreover, the front-loading of trade earlier this year may leave firms exposed to shocks.
Inventory overhangs could reduce import demand and result in higher holding costs or losses if expected demand fails to materialise.
Structural reforms, trade deals offer brighter long-term path
On a more positive note, the IMF notes that a breakthrough in trade negotiations could help reduce tariffs, lower uncertainty, and foster investment.
If these agreements extend to digital services and foreign investment, they could yield long-term gains in productivity and resilience.
Additionally, such progress could encourage structural reforms in areas such as labour markets, business regulation, and competition, setting the stage for more sustainable medium-term growth in a challenging global environment.
Follow us on:
Short link:
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mid East Info
a day ago
- Mid East Info
Abu Dhabi Fund for Development Receives 'Great Place to Work' Certification for 2025 - Middle East Business News and Information
Abu Dhabi, United Arab Emirates – August 2025: In recognition of its ongoing efforts in promoting innovation and institutional excellence and aligned with its global and regional strategic development goals, Abu Dhabi Fund for Development ADFD has been officially certified as a 'Great Place to Work' for 2025 by the globally recognized Great Place To Work Institute. This milestone reinforces ADFD's ongoing commitment to fostering a culture that promotes positivity, professionalism, and employee empowerment, while aligning with global best practices in human capital management. It further reinforces the Fund's strategic objective of maximizing team performance to strengthen its mission of advancing sustainable development. His Excellency Mohammed Saif Al Suwaidi, Director General of ADFD, said: 'Receiving the 'Great Place to Work' certification is a testament of the Fund's growth journey and underscores its dedication to providing an empowering and inspiring work environment. He added: 'We are honoured to receive this global recognition, reinforcing ADFD's position as a leading national entity that prioritizes the success and shapes the future through promoting talent and ambition.' ADFD places significant emphasis on institutional excellence and employee empowerment by implementing integrated training programs and motivational initiatives that enable national talent and foster a culture of innovation and collaboration. It is also committed to building a transparent and trust-based work environment that encourages employee engagement, open communication, and active participation in decision-making and institutional achievements. This recognition coincides with ADFD's 54th anniversary and reinforces the Fund's long-standing commitment to driving national development through a comprehensive approach based on human capital investment, as it serves as the foundation for successful leadership and sustainable progress. The 'Great Place to Work' certification is among the most prestigious global certifications in the field of workplace excellence, based on comprehensive assessments of employee satisfaction, organizational culture, and alignment with institutional values.
Mid East Info
30-07-2025
- Mid East Info
Abu Dhabi Fund for Development Participates in the Groundbreaking Ceremony of Oman's Integrated Tourism Complex Project
The project is part of ADFD's investment strategy to accelerate sustainable economic development Abu Dhabi, UAE – July 2025: Abu Dhabi Fund for Development (ADFD) has participated in the groundbreaking ceremony for the Integrated Tourism Complex project in Salalah, Oman, with a total investment of AED764.5 million, underscoring its ongoing commitment to enabling key development projects in the tourism sector. The project aligns with the Fund's broader strategy to foster sustainable growth in partner nations through high-impact projects that promote economic diversification and strengthen tourism infrastructure. Attending the investment's groundbreaking ceremony was attended on the Omani side by His Excellency Azzan Al Busaidi, Undersecretary of the Ministry of Heritage and Tourism for Tourism, and the Manager of Dhofar Municipality. Representing Abu Dhabi Fund for Development were Eng. Rashid Al Kaabi, Executive Director of the Investment Sector, and Eng. Mohammed Al Hamedi, Technical and Admin Support Manager. Reinforcing the project's role as one of the most significant UAE investments in Oman's tourism sector. Spanning across a total area of 2.5 million square meters in Jinawf, Oman, the development aims to significantly enhance the city's tourism infrastructure and capacity through the construction of world-class hospitality facilities. Additionally, the project promotes the national goal of economic diversification and reinforces Oman's position as a leading tourism hub regionally and globally. The first phase of the project spans approximately 604,000 square meters, including the construction of a luxury resort which comprises over 120 rooms and chalets, as well as the developments of the marina, the rehabilitation of coastal and beachfront areas, and the implementation of essential infrastructure works, including roads and public utilities. These integrated components aim to deliver a seamless visitor experience, enhancing Salalah's tourism profile and contributing significantly to the sector's sustainable development. H.E. Mohammed Saif Al Suwaidi, Director General of Abu Dhabi Fund for Development, stated: 'This project is a testament to the deep-rooted strategic ties between the United Arab Emirates and the Sultanate of Oman. It reaffirms ADFD's ongoing commitment to supporting the development strategies of partner nations through investments that enable economic growth and generate a positive, sustainable impact for local communities. The project also reflects our vision of economic diversification and our proactive approach to advancing sustainable development through meaningful regional partnerships and shared prosperity.' H.E. Azzan Al Busaidi, Undersecretary of the Ministry of Heritage and Tourism for Tourism in Oman, emphasized that the project is expected to create hundreds of direct and indirect job opportunities while stimulating growth across key economic sectors. He added that it will enhance local capabilities through the integration of SMEs in key projects and offering training and capacity-building programs for Omani nationals in the fields of hospitality and tourism. The initiative aligns with Oman Vision 2040, which positions tourism as a central aspect for economic diversification, particularly in regions with abundant natural resources such as Dhofar. Aligned with ADFD's strategic investment goals, the project goes beyond enabling Oman's economic and tourism development. It also will bolster the tourism's sector's contribution to Oman's GDP, generate employment opportunities and support infrastructure development, further solidifying the country's position as a leading tourism hub in the region. This landmark initiative is a testament to decades of productive bilateral cooperation between the UAE and Oman, defined by diversified economic relations and robust strategic partnerships. Aligned with sustainable development goals and regional integration, the project aims to shape a prosperous economic future that advances the shared vision of both nations and their communities.
Mada
29-07-2025
- Mada
Hot money inflows boost Egyptian pound against the dollar
The Egyptian pound has appreciated against the United States dollar over recent days, reaching its highest exchange value since the beginning of the year at LE48.7 on Tuesday, according to the Central Bank of Egypt. Two informed sources told Mada Masr that the rebound was driven by a renewed influx of foreign investment in government debt instruments such as treasury bills and bonds. The pound has appreciated by 2.5 percent in July, retreating from a June peak at over LE50. In parallel, foreign inflows to government debt instruments reached between US$1 billion and $1.2 billion over the past three weeks, according to financial analyst Saad Ali of an investment firm, as well as estimates from an informed government source and a second financial analyst, both of whom spoke on condition of anonymity. Foreign holdings in debt instruments totaled $46 billion in mid-June, according to data reviewed by Ali and the government source. All three sources noted that hot money inflows significantly rebounded after an investor exit from the market during the exchange of fire between Israel and Iran in June. Levels now exceed those recorded just before the outbreak of the 12-day war, they said. Investor appetite for government debt is being driven by two main factors. The first is high returns, with six-month treasury bills offering yields of up to 27.7 percent at the start of this week. Investors are confident that yields will remain high as the central bank is not expected to cut interest rates rapidly, as inflation picks back up fueled by rising energy and transportation costs, according to Ali and the other financial analyst. Additional price hikes are also expected as the government proceeds with its fuel subsidy reform plan, part of its agreement with the International Monetary Fund — a step that could extend the current inflationary trend. Inflation has picked up markedly over the past four months, following a four-month slowdown. May stood out in particular, with rates registering the sharpest monthly increase in eight months, largely driven by rising energy prices, before somewhat slowing in June. Also stimulating foreign investment in Egypt is the global decline of the US dollar, which has fallen to its lowest level since the 1970s against major currencies, and is expected to continue the decline. In just the first half of this year, the dollar dropped by around 11 percent, according to the DXY Index. This decline has been driven by the policies of US President Donald Trump, which have raised concerns over the independence of the Federal Reserve and pushed for steep interest rate cuts, prompting investors to shift toward emerging markets or gold, Ali and the financial analyst said. The financial analyst stressed that the pound's appreciation does not necessarily reflect an improvement in Egypt's economic performance. The balance of payments continues to suffer a significant deficit, amounting to $40 billion, as does the gap between Egypt's dollar-denominated obligations and its foreign currency revenues. In fact, both analysts agreed that the renewed hot money inflows will once again leave the economy fragile. 'Hot money is a ticking time bomb,' the financial analyst said. Egypt was thrown into economic turmoil in the first quarter of 2022 following the outbreak of the Russia-Ukraine war, when investors withdrew around $22 billion from its sovereign debt market over the first months of the year, triggering a two-year liquidity crisis. During that period, the exchange rate surged from around LE15 to LE50 to the dollar, with the central bank implementing four successive devaluations and ushering in a wave of rapid inflation. Former Finance Minister Mohamed Maiet acknowledged the mistake of repeatedly relying on hot money at the time, staking out a direction to reduce the state's dependence on the debt market as a liquidity source — a shift that has yet to materialize.
