Key judgements

1. The IMF programme is ending on a stronger footing than expected.The $8bn Extended Fund Facility closes in December, with a final disbursement of about $2.3bn expected once the last review is agreed.¹
2. Inflation is easing, but policy has turned cautious.Headline inflation fell to 12.0% in October, yet the central bank raised its overnight deposit rate to 20% on 29 October, citing the prolonged regional conflict.²
3. Financing needs are the main structural vulnerability.The IMF expects gross financing needs to peak at 42% of GDP this fiscal year.³
4. Suez revenues are recovering slowly and remain exposed.Receipts are improving but remain well below pre-Red Sea-crisis levels, leaving a key source of foreign currency vulnerable.⁴
5. Major political instability is unlikely in the next six months.The bigger risks for business are economic: currency moves, payment delays and import procedures.

Risk scorecard

Politics & security

Egypt's political system remains highly centralised, and the government under Prime Minister Mostafa Madbouly is focused on keeping the reform path on track. After the IMF's seventh review, Madbouly called for faster structural reform, including a bigger role for the private sector and implementation of the State Ownership Policy.⁵

The main security risk comes from outside Egypt's borders. The regional conflict that followed US-Israeli strikes on Iran in late February 2026 has disrupted shipping lanes and energy markets.⁶ Egypt's role in Gaza diplomacy and reconstruction gives it diplomatic weight but also exposure to the Israel–Gaza conflict.

Domestic unrest is a lower-probability but high-impact risk. The trigger to watch is a sharp rise in the price of subsidised goods or fuel.

Economy & policy

Egypt has absorbed the regional shock better than many expected. The IMF said in September that reforms under its programme had strengthened growth and put inflation on a downward path, while Suez Canal activity continued a gradual recovery.⁷ In October the Fund raised its growth forecast for fiscal year 2026/27 to 4.7%, from 4.4% in July.¹

Nationwide annual inflation eased to 12.0% in October from 12.8% in September, and urban inflation fell to 12.7%.² However, the central bank raised rates by one point on 29 October because of higher energy and commodity prices, so it is not yet ready to resume easing.²

The end of IMF oversight is the key uncertainty for 2027. Investors will watch whether privatisation, tax reform and fiscal discipline continue without the Fund's reviews.

Trade & supply chains

Egypt is a major supplier of citrus, potatoes, onions, grapes and other fresh produce to UK and EU markets, and a key transit country through the Suez Canal. Both roles are exposed to regional disruption.

Suez receipts reached $1bn in the first quarter of 2026, up from $800m a year earlier, while tourism revenue also rose.⁸ But canal revenue remains well below its pre-disruption level.⁴

For importers, the practical risks are longer and less predictable transit times, higher freight and insurance costs, and exchange-rate effects on supplier pricing. Gulf investment, including large coastal developments, continues to support the external position.⁹

Scenarios

What to watch

Implications for business

Key judgements

1. Continuity, not change, after the September election.The monarchy-aligned PAM won 97 of 395 seats and leads a four-party coalition under Fatima Ezzahra El Mansouri, Morocco's first woman head of government.¹
2. The PJD's comeback is a warning signal.The Islamist party rose from 13 seats in 2021 to 54, while turnout fell to 38%, pointing to frustration with prices and jobs.²
3. The economy remains one of the region's most resilient.The World Bank expects 4.4% growth in 2026 and inflation of just 1.2%.³
4. Western Sahara has entered a new phase.The UN mission MINURSO is ending after the Security Council failed to renew its mandate, a move Rabat welcomed and Algeria criticised.⁴
5. World Cup 2030 spending is a major opportunity.It creates a strong pipeline for construction, transport and services firms, and raises expectations the government must meet.

Risk scorecard

Politics

The 23 September election produced a predictable result. PAM came first with 97 seats, ahead of the National Rally of Independents (66) and Istiqlal (65), from 27 competing parties.² The King appointed PAM's Fatima Ezzahra El Mansouri as head of government on 29 September, and her 32-member cabinet was sworn in on 16 October.⁵

The coalition comprises PAM, Istiqlal, the Socialist Union of Popular Forces (USFP) and the Party of Progress and Socialism (PPS).⁶ Real power over defence, religion and foreign policy remains with the palace, which limits the policy risk from coalition politics.

The stronger signal is social. Voters urged the new government to tackle rising prices, unemployment and pressure on public services.⁷ The PJD's surge and low turnout show that this discontent is finding a political outlet.

Western Sahara & diplomacy

On 30 October Russia vetoed a US-sponsored resolution on MINURSO that had won 11 of 15 votes, so the mission's mandate lapsed on 31 October.⁸ Morocco's royal palace called this a significant step towards removing the issue from the Security Council's agenda; Algeria expressed deep regret.⁴

We expect Morocco to press ahead with its autonomy plan and investment in the southern provinces. The near-term risk is diplomatic friction with Algeria rather than renewed armed conflict, though incidents cannot be ruled out.

Separately, Morocco and Israel agreed in September to upgrade their liaison offices to full embassies.⁹ This deepens trade and technology ties but may sharpen domestic opposition.

Economy & trade

Growth reached an estimated 4.9% in 2025, the strongest in a decade, driven by public investment for the 2030 World Cup and a recovery in agriculture.¹⁰ The government is investing more than 190 billion dirhams (about $20bn) in rail, roads, airports, stadiums and urban infrastructure.¹¹

The regional conflict has raised energy import and freight costs, an estimated drag of 0.8 percentage points on growth, and labour underutilisation remains high at 22.5%.¹² Recurrent drought and dependence on European demand are the main long-term risks.¹⁰

For buyers, Morocco is a reliable supplier of tomatoes, citrus, berries and other produce to Europe, with shorter, more predictable routes than eastern Mediterranean suppliers. Water availability is the swing factor for volumes and prices.

Scenarios

What to watch

Implications for business