Iran-U.S. conflict and energy risks push Egypt inflation outlook higher: Central bank

CAIRO - 10 May 2026: The Central Bank of Egypt (CBE) warned that escalating tensions between Iran and the United States, alongside potential energy shocks, are adding upward pressure to Egypt’s inflation outlook and weighing on economic growth expectations.

 

In its latest Monetary Policy Report, the central bank said inflation is expected to accelerate during the second quarter of 2026 and remain elevated throughout the year before resuming a downward trend in the first quarter of next year.

 

The bank forecast average annual headline inflation at between 16 percent and 17 percent in 2026, easing to a range of 10 percent to 13 percent in 2027, compared with 27.4 percent recorded last year.

 

Despite the expected decline, the projected rates remain above the central bank’s target of 7 percent, plus or minus 2 percentage points, for the fourth quarter of 2026, with inflation only expected to approach the target by late 2028.

 

The report highlighted several upside risks to inflation, including the possibility of a prolonged regional conflict and stronger-than-anticipated effects from fiscal adjustment measures.

 

The central bank also revised down its growth forecasts, projecting gross domestic product (GDP) growth at 4.9 percent for the current fiscal year instead of the previously estimated 5.1 percent, while lowering its FY2026/2027 forecast to 4.8 percent from 5.5 percent.

 

It attributed the weaker outlook to lower expected contributions from non-oil extractive industries, continued weakness in non-petroleum manufacturing and services, and slowing external activity amid weaker foreign investment flows.

 

According to the report, the Iran-U.S. conflict has worsened global economic sentiment and could directly affect Egypt if the crisis results in energy supply disruptions or higher oil prices, which would further intensify inflationary pressures.

 

Still, the central bank said the Egyptian economy remains capable of absorbing and limiting the spillover effects of external crises on domestic economic activity.