S&P Global Ratings has lowered its 2026 economic growth forecasts for the UK and Egypt, citing risks and uncertainties stemming from the US-Iran war.
The gross domestic product of the UK, Europe's fourth-biggest economy, is expected to slow down to 1.1 per cent this year, from an estimated 1.4 per cent in 2025, the New York-based agency said on Friday.
Higher oil and gas prices and other factors tied to the Middle East conflict would influence the direction of inflation and interest rates, S&P said.
Despite sourcing a minimal amount of gas from the Middle East, the UK economy remains vulnerable to the global energy price shock because it relies on imported oil and gas and other energy-related inputs, S&P analysts wrote.
"Rising energy and petroleum costs are expected to affect household expenditure, while higher business input prices will dampen business confidence and investment levels," they said.
S&P also maintained its AA/A-1+ long- and short-term foreign and local currency sovereign credit ratings on the UK with a stable outlook, expecting the country to weather the conflict's fallout.
An AA rating is the third-highest grade on Moody's scale, classified as high investment grade. Investment grade makes it easier for a country to access capital markets and raise funding when it wants to borrow.
S&P noted that the rating "is balanced against risks stemming from the UK's constrained fiscal position, elevated public debt and high government spending, including on debt servicing".
Egypt, meanwhile, is expected to post real GDP growth of 4.7 per cent in its 2025-2026 fiscal year, slightly lower than an initial 4.8 per cent reading, S&P said, mainly due to shipping disruptions pressuring trade, logistics and import prices.
That would halt the economic momentum of the Arab world's most populous nation, as real GDP grew 5.3 per cent in the first half of the current fiscal year.
"Consumption and investment are likely to soften amid heightened uncertainty and rising inflation," the S&P analysts said.
S&P expects growth slowing further to 4.3 per cent in 2026-2027, down from a previous 4.7 per cent forecast.
The agency also affirmed its B/B long- and short-term foreign and local currency sovereign credit ratings on Egypt, keeping the country six levels below investment grade, while giving a stable outlook.
S&P may raise its ratings if Egypt’s net government and external debt positions improve faster than expected.
"We could also raise the rating should policies to diversify the economy and open up key sectors to foreign investment benefit the Egyptian economy, including the quality of external financing," it said.
