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Daily Economic Update
09.10.2025Egypt: Inflation slows in September, but October figure will be key. According to the Central Bank of Egypt (CBE), headline inflation eased for the fourth consecutive month, coming in at 11.7% y/y (1.8% m/m) in September, down from 12.0% y/y (0.4% m/m) in August. In contrast, core inflation accelerated to 11.3% y/y (1.5% m/m) from 10.7% y/y (0.1% m/m) previously. The monthly increase was mainly driven by food and beverage prices, which rose 1.9% m/m and represent about 36% of the consumer basket, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). This was slightly above our projection of 1.2% m/m, largely due to a 3.4% m/m rise in housing expenses (18% of the basket). Looking ahead, we expect inflation to pick up in October, potentially reaching 2.5% m/m if the fuel pricing committee raises domestic fuel prices, which could push the annual rate close to 13% y/y. Earlier this month, CBE revised its 2025 average inflation forecast down to 14% y/y from 15%. We continue to anticipate an upward inflation trajectory in Q4 2025, before gradual deceleration beginning in Q2 2026. With the next MPC meeting scheduled for November 20 and the data driven approach followed by the CBE, the October inflation print will likely be a key determinant of whether the bank continues its easing cycle or pauses.
Egypt: Trade deficit widens, but current account improves on strong FX inflows. Egypt’s balance of payments for FY24/25 showed a mixed performance, according to CBE data. While exports grew 24% y/y to USD 40 billion, the trade deficit widened 29% y/y to USD 51 billion due to a surge in imports, particularly petroleum imports, which jumped 46% to USD 19.5 billion. Meanwhile, tourism revenues increased 16% y/y to USD 16.7 billion, supported by higher tourist nights, and remittances from Egyptians abroad rebounded sharply by 66% y/y to USD 36.5 billion, restoring a key source of FX inflows after a significant fall in recent years. By contrast, Suez Canal revenues fell 45.5% y/y to USD 3.6 billion, reflecting the impact of the continued Red Sea disruptions and regional tensions. Despite the wider trade gap, the overall current account deficit narrowed 26% y/y to USD 15.4 billion, largely supported by the robust tourism and remittance inflows. The shortfall was mainly financed by foreign direct investments (FDI), which stood at USD 12 billion, down from USD 46 billion in FY23/24 due to the one-off Ras El Hekma deal. Excluding this exceptional transaction, FDI inflows reflect a notable recovery in underlying investment activity.
MENA: The World Bank revised up its economic growth forecasts for the GCC and Egypt. For the GCC as a whole, the Bank now expects aggregate real GDP growth to reach 3.5% in 2025, up from 3.2% previously, supported by the unwinding of voluntary oil production cuts, expanding non-oil sector activity, helped by ambitious investment plans and continued, elevated public spending. The Bank also expects benchmark oil prices to remain around current, mid-$60/bbl levels, over the forecast period. Growth is expected to accelerate further to 4.4% in 2026 and 4.7% in 2027, with Qatar anticipated to lead the region in 2026 and 2027 with growth of 5.3% and 6.8%, followed by the UAE at 5.0% and 5.1% and Saudi Arabia at 4.3% and 4.4%. Kuwait’s growth is forecast to rise from 2.3% in 2025 to 2.8% in 2026 and 2.7% in 2027. The Bank also noted that the impact of President Trump’s trade tariffs on GCC non-oil exports is expected to be more limited than previously anticipated, further supporting regional resilience. For Egypt, the World Bank raised its FY25/26 growth forecast by 0.1 percentage points to 4.3% y/y, citing the positive impact of ongoing fiscal and monetary reforms and increased external support. Growth is expected to accelerate further to 4.8% in FY26/27, reflecting improving investment sentiment and greater macroeconomic stability. However, the Bank also cautioned that regional geopolitical tensions continue to pose downside risks to growth across the MENA region, contributing to uneven outlooks between energy exporters and importers.
Saudi Arabia: Government seeks $10 billion loan. Saudi Arabia is reportedly seeking a $10 billion sovereign loan, marking a shift from its usual reliance on bond markets to finance its budget. The move comes amid mounting fiscal pressures, including lower oil revenues and slower foreign investment in mega projects like NEOM. The kingdom’s recent pre-budget statement showed an expected widening of the fiscal deficit to 5.3% of GDP in 2025, up from 2.5% in 2024, prompting the search for alternative financing sources. The deficit is projected to narrow over the medium term on the back of higher revenues. The loan would help fund Vision 2030 development goals, though increasing reliance on non-market debt could raise future borrowing costs.
US: FOMC members cautious on monetary stance, seeing diverging risks to employment and inflation. According to the FOMC September meeting minutes, officials were generally divided about the extent of further monetary easing although voted to lower the interest rate by 25 basis points (bps) seeing increased “downside risks to employment.” While “most judged that it likely would be appropriate to ease policy further over the remainder of this year” but they maintained caution given “upside risks to their outlooks for inflation” and emphasizing that “monetary policy may not be particularly restrictive.” Importantly, the minutes also highlighted that “participants generally assessed that recent readings of these (job) indicators did not show a sharp deterioration in labor market conditions”. The dot-plot showed two more 25 bps rate cuts this year but with a tight 10-to-9 majority, signaling members’ heightened uncertainty about the inflation outlook and further weakening in the employment scene. That ambiguity is further elevated by the absence of some critical economic data releases amid the ongoing government shutdown and President Trump’s threat to permanently fire many federal workers. We note that higher tariffs’ impact is becoming increasingly visible in consumer price inflation, but that impact is still overall moderate for now, while the job market remains in a low-hiring and low-firing mode. Though with peak tariff uncertainty behind us, pending the Supreme Court ruling, hiring activities by private businesses should pick up somewhat from very low levels currently. Nonetheless, the futures market continues to indicate two more 25 bps rate cuts by the end of this year.
Eurozone: French President Macron to name a new prime minister by Friday. President Emmanuel Macron is expected to appoint a new prime minister on Friday, following the resignation of Sébastien Lecornu—who stepped down just hours after announcing his cabinet, marking the shortest tenure in modern French history. Macron had asked Lecornu to stay temporarily and consult with political leaders across the spectrum. After two days of talks, Lecornu said no formal agreement was reached but that a viable path forward exists. He confirmed his role is now “over”, leaving the final decision to Macron. That said, Lecornu did voice optimism about reaching a political accord to enable the formation of a new government. The market reaction was positive with French bonds rallying yesterday while the CAC 40 index closed 1.1% higher.