The UK-based research firm said that the Egyptian pound’s rebound this year — alongside gains in exports and foreign exchange inflows — is starting to deliver real benefits to the economy.
Egypt’s strengthening currency, a surge in tourism and remittances, and a sharp improvement in the current account are all signs of a broad economic recovery underway, according to a recent report from Capital Economics.
The UK-based research firm said that the Egyptian pound’s rebound this year — alongside gains in exports and foreign exchange inflows — is starting to deliver real benefits to the economy.
Although the flotation of the EGP initially triggered economic concerns, Capital Economics believes the move is now laying the groundwork for sustained growth and greater macroeconomic stability.
Among the clearest signs of recovery is the performance of Egypt’s manufacturing sector, where output reached a record high in May. This was driven in large part by stronger activity in key exporting industries like textiles and chemicals — sectors that have become more competitive due to the weaker real effective exchange rate.
The EGP has appreciated nearly 5% against the US dollar since January, while its inflation-adjusted, trade-weighted value is up around 10%.
Despite these gains, Capital Economics notes that the currency remains close to post-2016 devaluation lows and is still about 25% below early 2024 levels—suggesting that Egypt’s external competitiveness remains strong. The firm explains that the EGP’s recent gains largely reflect broad-based US dollar weakness.
In contrast, the EGP has actually fallen around 7% against the euro this year and has remained steady on a trade-weighted basis since the beginning of the year.
The improvement in Egypt’s current account has been especially pronounced; in the first nine months of FY2024/2025, the deficit narrowed to $13.2 billion, with a dramatic 69.3% year-on-year reduction in the third quarter alone. Capital Economics attributes this to a combination of surging remittances, a jump in non-oil exports, and booming tourism revenues.
Tourism receipts rose to 4.6% of GDP in the four quarters to Q1 2025—a 14-year high—while total tourism revenue increased 15.4% y-o-y to $12.5 billion in the first nine months of the fiscal year.
Remittance inflows also reached a notable milestone, hitting a seven-year high equivalent to 9.3% of GDP in the four quarters leading to Q1 2025. Improved foreign exchange availability and confidence among Egyptians abroad have supported this surge.
However, the report notes that Suez Canal revenues remain under pressure due to ongoing disruptions in Red Sea shipping. Receipts fell 54.1% y-o-y to $2.6 billion in the first nine months of the fiscal year.
Capital Economics argues that these improvements in the external accounts are helping restore macroeconomic stability. With the balance of payments strengthening, attention can now turn to long-term structural reforms aimed at unlocking faster and more sustainable GDP growth.
Nonetheless, the report flags a few external risks, chief among them are rising global trade tensions, particularly the 10% base tariff imposed by the US, which could weigh on Egypt’s textile sector—given its heavy reliance on the American market. Still, Capital Economics expects the overall economic impact to be limited.
