Egypt’s economic growth will accelerate to 5.8% in the current fiscal year, up from 5.6% in FY2018-2019, a Reuters poll finds. This prediction is in line with the Finance Ministry’s recently-update growth expectations of 5.8-5.9%. The 20 economists polled by the newswire see the economy growing at 5.9% in the upcoming FY2020-2021.

The forecast is an improvement from an October poll by the newswire that saw economists suggesting a growth rate of only 5.5% during the ongoing fiscal year, and 5.7% in FY2020-21. Last fiscal year, growth registered 5.6%.

The improved outlook is supported by recovering household spending: “We expect a slight increase in household consumption accompanied by higher exports and lower imports,” Naeem Brokerage’s Allen Sandeep said.

Despite this rosy outlook, the better part of our recent economic expansion was state-led. Non-oil private sector activity, as measured by the IHS / Markit Purchasing Managers' Index (PMI), has expanded in only six individual months since the government kicked off the IMF-backed economic reform program in November 2016. In December, the PMI gauge showed activity has contracted for the fourth consecutive month.

Analysts are also expecting inflation to speed up, despite forecasting the opposite in October, Reuters noted. Annual urban inflation will slow to 6.8% throughout FY2019-2020, but will edge up to 7.5% in FY2020-2021, and to 8.0% the following fiscal year, they predict. Inflation effectively doubled to 7.1% last month due to rising food prices, after nosediving to 3.1% in October — its lowest level in nine years. “December 2019’s inflation print confirms our expectation that prices will continue to accelerate in months to come as favorable base effects diminish,” NKC African’s Callee Davis said.

EGP to continue weakening until FY2021-2022 to EGP 17.08 per USD 1: The economists expect the USD exchange rate to end the fiscal year at EGP 16.10, up from 15.80 last Thursday. The EGP will then trade at 16.50 to the greenback by the end of FY2020-2021, and at EGP 17.08 by the end of FY2021-2022. Davis says we should begin to see the EGP’s sustained 12-month appreciation come to an end this April as a USD 1 bn eurobond repayment is due.

Finally, the poll sees the Central Bank of Egypt lowering key overnight lending rates to 11.75% in 2020, and further to 10.75% in 2021 and 2022. Earlier this month, the CBE held its overnight deposit rate at 12.25% and its overnight lending rate at 13.25%.