The Central Bank of Egypt (CBE) has expected inflation to accelerate during the second quarter of this year and remain at elevated levels throughout 2026 before resuming its downward path in the first quarter of next year.
In its latest Monetary Policy Report, the central bank projected average annual headline inflation to range between 16% and 17% in 2026, and between 10% and 13% in 2027, compared with 27.4% recorded last year.
The bank noted that these projections remain above its inflation target of 7%, plus or minus 2 percentage points, on average during the fourth quarter of 2026, with inflation expected to move closer to the target only by the fourth quarter of 2028.
The central bank warned that the inflation outlook remains exposed to upside risks, including the possibility of a prolonged regional conflict and stronger-than-expected impacts from fiscal consolidation measures.
The report also showed that the central bank revised down its gross domestic product (GDP) growth forecasts for the current and upcoming fiscal years. Growth is now expected at 4.9% in the current fiscal year, down from a previous estimate of 5.1%, while the forecast for FY2026/2027 was lowered to 4.8% from 5.5%.
The bank attributed the downgrade to weaker expected contributions from non-petroleum extractive industries, continued softness in non-oil manufacturing and services activity, as well as slower external economic activity amid declining foreign investments and related returns.
According to the report, the outbreak of conflict between Iran and the United States has negatively affected global economic expectations, creating direct implications for the Egyptian economy, particularly if the conflict triggers an energy shock that could intensify inflationary pressures.
Despite the risks, the central bank said the Egyptian economy remains in a position that allows it to contain and limit the transmission of external shocks to domestic economic activity.
