Egypt is on track to overtake South Africa as Africa’s biggest economy by 2028, according to the International Monetary Fund’s latest GDP projections. This shift would mark the first time in at least nearly half a century that the North African nation claims the top spot.
According to the IMF, the economy is projected to expand to $485.3 billion, dethroning South Africa — currently the continent’s largest — which is forecast at $458.4 billion. Nigeria is expected to rank third at $375.9 billion, followed by Algeria ($297.3 billion) and Morocco ($222.2 billion).
The prediction reflects a steady macroeconomic turnaround anchored on currency liberalisation, aggressive policy tightening, large-scale foreign investment and structural reforms aimed at expanding private-sector activity.
For Egypt which is currently the continent’s second largest economy, growth momentum has strengthened notably as the economy expanded by 5.3 percent in the third quarter of in 2025 — the fastest pace in more than three years — supported by gains in non-oil manufacturing, tourism and telecommunications, according to Rania Al-Mashat, the country’s planning minister.
“Stabilisation efforts have delivered important gains, and the Egyptian economy is showing signs of robust growth,” the IMF said. “This stability has been achieved amid a challenging regional security environment and heightened global uncertainty, and economic activity picked up to 4.4 percent in the full year 2024/25, from 2.4 percent the previous year.”
External balances have improved. The current-account deficit narrowed as remittances and tourism receipts strengthened, while non-oil exports posted solid growth. Portfolio inflows into local-currency debt climbed to about $30 billion last year, helping lift foreign-exchange reserves to $56.9 billion.
The Central Bank of Egypt has turned more optimistic on growth, raising its forecast to 5.1 percent for fiscal year 2025/26 and 5.5 percent for 2026/27, citing stronger expected contributions from manufacturing and services and the impact of gradual monetary easing.
Investment surge reshapes outlook
A central pillar of Arab nation’s recovery has been an unprecedented wave of foreign capital.
A landmark $35 billion agreement with the United Arab Emirates to develop the Ras El Hekma coastal megacity triggered a sharp jump in foreign direct investment, propelling Egypt into the world’s top 10 FDI destinations in 2024, according to UN Trade and Development.
The deal alone lifted inflows from $10 billion in 2023 to $47 billion in 2024, accounting for nearly half of Africa’s total. Although inflows normalised last year, the country still led the continent with an estimated $11 billion, underscoring sustained investor interest even as regional investment cooled.
The broader reform package — including the shift to a flexible exchange rate, subsidy rationalisation, tax digitisation and expanded social transfers — has helped eliminate foreign-exchange shortages that previously constrained growth.
Policy pivot and macro stabilisation
With inflation moderating, policymakers have begun cautiously pivoting toward growth support.
Headline inflation has fallen sharply from a record 38 percent in September 2023 to 11.9 percent in January, creating room for monetary easing. The Egyptian pound has also stabilised, trading near its strongest level since mid-2024.
Last month, policymakers cut policy rates by 100 basis points — its second consecutive reduction — bringing the overnight deposit rate to 19 percent and signalling a gradual shift from emergency tightening toward credit support.
The central bank now projects growth of 5.1 percent in 2025/26 and 5.5 percent in 2026/27, driven largely by non-oil manufacturing and services and supported by expected expansion in private-sector credit.
Labour market conditions are also improving. Unemployment fell for a fifth straight year to 6.25 percent in 2025, the lowest level in roughly a decade. Combined with easing inflation, the country’s misery index has dropped sharply, indicating improving household conditions.
Risks remain
Despite the improving trajectory, the IMF cautions that reforms must deepen for gains to be durable.
Key priorities include accelerating state divestments, reducing the footprint of state-owned enterprises and ensuring a level playing field for private firms. Egypt’s mixed economic model — combining significant state presence with market liberalisation — remains a structural constraint.
“This includes significant further progress with the divestment agenda, and additional efforts to level the playing field, and avoiding the establishment or expansion of activities of existing State Owned Enterprise and other economic authorities,” the multilateral lender said.
External vulnerabilities also persist, including exposure to volatile portfolio flows and regional geopolitical risks.
Still, if current reforms hold and growth momentum is sustained, the country appears increasingly well-positioned to displace South Africa as Africa’s economic heavyweight before the end of the decade — a symbolic shift that would underline the continent’s changing macroeconomic hierarchy.
