According to the EBRD’s latest Regional Economic Prospects report, economic growth in the southern and eastern Mediterranean (SEMED) region exceeded expectations in the first half of 2025, averaging 3.6 per cent, up from 1.2 per cent in 2024. Economic growth in the SEMED region is now forecast to average 3.7 per cent across 2025 as a whole; however, the EBRD expects growth to then slow to 3.2 per cent in 2026. The SEMED region has benefited from a strong recovery in tourism, increased remittance flows and improving external balances, all of which have helped to drive the stronger performance. Inflation has moderated significantly in Egypt, Tunisia and Morocco as food price pressures have eased.

Egypt:  Annual economic growth exceeded expectations, rising from 2.4 per cent in July 2024 to 4.2 per cent in March 2025, driven by a recovery in the manufacturing sector following a deep contraction and strong performance in wholesale and retail trade and transport. Remittances increased by 82.7 per cent year on year, while foreign investors returned to the short-term government debt market, owning 44.7 per cent of outstanding T-bills as of March 2025. Annual inflation averaged 15.7 per cent between January and July 2025, half of the rate observed during the equivalent period in 2024.

Jordan: Economic activity picked up in the first quarter of 2025, with growth reaching 2.7 per cent year on year, led by manufacturing, financial services and agriculture. However, growth is expected to slow, averaging 2.4 per cent across 2025 as a whole, before picking up slightly to stand at 2.6 per cent in 2026, supported by a recovery in tourism and the re-opening of the Syrian market to Jordanian businesses. There are significant downside risks to the medium-term outlook stemming from weaker global demand and regional instability.

Lebanon: Following a sharp 7.5 per cent contraction in 2024, economic growth is projected to reach 1.9 per cent in 2025, driven by a gradual rebound in tourism and limited reconstruction inflows, rising to 2.9 per cent in 2026 as geopolitical tensions subside and critical banking-sector reforms gain traction, improving the prospects for an IMF-supported programme. However, risks from regional instability remain present, and the resumption of international donor support will be a key condition for a robust recovery.

Morocco: Annual growth averaged 4.7 per cent in the first half of 2025, up from 3.8 per cent in 2024. Annual inflation fell to an average of 1.2 per cent in the period from January to July 2025, owing to the easing of food, fuel and transport prices. Growth is expected to average 4.2 per cent in 2025 and 4.0 per cent in 2026, supported by public investment. Downside risks relate to a potential slowdown in European markets that could dampen remittances and demand for exports and the possibility of adverse weather shocks.

Tunisia: Annual economic growth in Tunisia accelerated from 1.6 per cent in 2024 to 2.4 per cent in the first half of 2025, led by agriculture, construction, trade, and the manufacturing of mechanical and electrical equipment. Growth is expected to average 2.1 per cent in 2026, with slow improvements to the business environment and subdued investment continuing to weigh on the outlook and downside risks stemming from external vulnerabilities that could exacerbate the impact of global economic shocks.