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Thursday, 6 July 2017

Egypt’s economy to accelerate in FY2018-19

The worst is now probably over for Egypt, with Egypt’s economy looking set to accelerate in FY2018-19, according to a report on MENA economies by Capital Economics (pdf) which came out on Wednesday. The research firm forecasts GDP growth in 2019 to reach 5.3%, up from 4.3% in 2018 and 2.5% in 2017. The inflows which flooded into Egypt since the EGP growth had been the primary driver of this growth in the economy, which will be coupled with further fiscal tightening to rein in the large budget deficit and bring down the public debt-to-GDP ratio. A rise in the value-added tax (VAT) rate and further subsidy cuts will play a role in this recovery.

As for inflation, Capital Economics expects this to drop over the next 11-12 months, with consumer inflation falling to 29% in 2017, and to 12.5% in 2018, before dropping below the 10% mark in 2019 to 8.5%.

The firm’s outlook on the region is also positive, saying that the slowdown in MENA should bottom out in the second half of the year, with growth averaging 2.5% for the year. A notable exception would be Saudi Arabia, whose economic contraction is expected to continue. Morocco is likely to be the region’s top-performing economy, according to the report.

Separately, the EGP float had also contributed to Egypt being the third biggest market for contract awards in the MENA region in 2016, despite recording a 23% drop in the value of main contract awards, a report by Middle East Business Intelligence (MEED) said on Wednesday. Egypt signed USD 18.4 bn worth of contracts during the year, beating ou GCC countries like Qatar and Kuwait with only the UAE and Saudi Arabia signing more. Top contracts for last year were the Zohr field, the Dairut power project, and the Cairo Metro. MEED anticipates that the biggest growth in new contracts this year is likely to come from construction, with USD 129.4 bn of projects in the pipeline. The next biggest sectors are power, with USD 117.4 bn, and transport, with USD 57.4 bn.

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