The International Monetary Fund cut its 2013 growth forecast for the Egyptian economy to 2 percent in its April 2013 World Economic Outlook report, down from the 3 percent initially predicted last October.
The international lender blamed political instability in the country for the subdued growth.
"In Egypt, the uncertainty generated by a protracted political transition has held back growth and led to an increase in fiscal and external imbalances," the WEO report, released Tuesday, read.
The Egyptian government predicts that the economy will grow by 2.5 percent in the 2012/13 fiscal year, which will end on 30 June.
As for 2014, the IMF predicts a 3.3 percent growth rate for the Egyptian economy, substantially lower than the 4.1 percent forecast by the government for the 2013/14 fiscal year.
Economy in recession
"A growth rate of 2 percent effectively means zero growth in terms of GDP per capita [due to population growth], which means the Egyptian economy is in a state of stagnation," Hany Genena, chief economist at the Cairo-based Pharos Holding, told Ahram Online.
Economic activity in Egypt has slowed since the popular uprising in 2011, with sectors such as tourism  and real estate being the hardest hit. Uncertainty about the country's political future, meanwhile, along with an ongoing security vacuum, has deprived Egypt of much needed investment.
In its quest to restore confidence in the economy, the Egyptian government is seeking the IMF's seal of approval in the form of a $4.8 billion loan from the international lender. 
A technical team from the IMF concluded a two-week visit to Cairo on Monday without reaching an initial agreement with the government on the proposed loan's terms.
"Investment is currently at a standstill; I don’t expect the investment cycle to begin in 2013," Genena explained. "Securing the loan would unlock investments, as many investors are waiting for the loan to have a clear view on the future of the Egyptian economy."
Moreover, the austerity measures that the Egyptian government plans to adopt with a view to curbing its budget deficit are likely to take a further toll on economic growth.
"Austerity is contractionary by definition, but it's a bridge the Egyptian economy must cross," Genena said.
The IMF also highlighted the need for fiscal consolidation through cutting expenses and raising revenue, asserting that heavy government borrowing serves to raise interest rates, which in turn has a negative effect on growth.
"The need for fiscal consolidation, therefore, may be more urgent in economies where debt ratios are already high or debt dynamics are less favourable," the IMF report read, citing Egypt, Hungary and Jordan.
As for employment, the IMF sees jobless rates in Egypt growing to 13.5 percent in 2013, reflecting the economy's inability to create enough employment opportunities to accommodate the half million Egyptians that enter the job market annually.
Inflation, meanwhile, is expected to average 8.2 percent in 2013, down from 8.6 percent in 2012. In 2014, however, consumer prices are expected to grow by a sizeable 13.7 percent.