Specifically, Egypt is expected to face particular challenges as the dollar strengthens, which will put downward pressure on currencies such as the Egyptian pound (EGP).
According to Fitch Solutions’ research unit, BMI, countries in the MENA region—particularly those in the Gulf Cooperation Council (GCC)—are expected to remain largely unaffected by direct tariffs from the Trump administration. The firm stated in its MENA Monthly Outlook Report that economic and strategic considerations would shield these countries from such measures.
While exports from the region are not likely to be significantly impacted, the report warns of potential consequences for oil prices and inflation. More debt-laden emerging markets in the region are anticipated to feel the effects more keenly.
Specifically, Egypt is expected to face particular challenges as the dollar strengthens, which will put downward pressure on currencies such as the Egyptian pound (EGP).
BMI explained, “A stronger dollar will exert depreciatory pressures on the currencies of Algeria, Morocco, Tunisia, Israel, and Egypt. This scenario would pose significant challenges for Egypt, as it could slow the decline in price growth, hinder the monetary policy easing cycle, and adversely impact economic growth.”
Looking ahead to Egypt's economy in 2025, BMI forecasts a real GDP growth of 3.89%, with the Egyptian pound expected to stabilize at 52.51 against the USD by the year’s end.
The report also discussed the broader monetary landscape, with the firm anticipating a 45% probability that the US Federal Reserve will cut interest rates by 50 basis points in 2025. It assigns a 30% chance to a smaller 25-basis point cut and a 10% chance to a 25-basis point hike.
The report further noted that tight US monetary policy would create challenges for policymakers in the GCC and Jordan, particularly since inflation remains relatively low.
This would also exert pressure on non-oil sectors in the GCC and Jordan’s overall economy. Egypt, too, could suffer from risk-off sentiment, leading to potential outflows of portfolio investments.
Oil prices remain a significant variable, with BMI noting that tariffs, efforts to boost US oil production, and potential easing of sanctions on Russia pose downside risks to oil prices.
The firm’s core forecast expects Brent crude prices to average $76 per barrel in 2025, down from $80 per barrel in 2024. Lower oil prices could negatively affect MENA’s oil-exporting countries, likely prompting OPEC+ to delay the return of oil to the market. On the other hand, MENA’s net oil-importing countries, including Egypt, would benefit from lower oil prices, reducing their import bills and government spending on subsidies.
In terms of trade relations, BMI highlighted that the Trump administration is unlikely to impose direct tariffs on MENA countries, mainly due to broader economic and strategic considerations. “Imposing tariffs would counter Trump’s efforts to expand the Abraham Accords and reduce China’s influence in the Middle East,” the report stated.
The administration aims to deepen ties with Saudi Arabia, and imposing tariffs on GCC oil exports could drive the region closer to China, which would undermine US objectives.
The report also addressed the potential impact of higher aluminum tariffs on MENA economies. While Bahrain’s exports to the US account for 5.5% of its total exports and 1.5% of GDP, BMI believes that the effects will be manageable.
This is due to strong global aluminum demand, which is expected to offset weaker US demand. As a result, Bahrain and other countries could redirect exports to other markets, and the US may seek a deal with Bahrain and the UAE to mitigate the impact.
