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Wednesday, 11 October 2017

IMF World Economic Outlook: Egyptian GDP to grow by 4.5% next year as inflation cools, job creation ramps up; EM remain vulnerable to monetary policy shifts in developed market

The IMF expects the Egyptian economy to grow by 4.1% this year — and sees growth accelerating to 4.5% in FY 2017, according to its October 2017 World Economic Outlook released yesterday. Growth will be “supported by reforms aimed at correcting fiscal and external imbalances, restoring competitiveness, and creating jobs.”

Cooling inflation: The institution also sees consumer price inflation averaging 23.5% this year and then falling to 21.3% next year. Reuters reminds us that the IMF Mission Chief to Egypt Subir Lall expects inflation to drop to “slightly above” 10% next year.

Job creation in the cards: While the official unemployment rate stands at 11.9%, the IMF sees it falling from an estimated 12.2% this year to 11.5% in 2018

The IMF is also feeling bullish on the global economy after revising several of its economic forecasts… The report sees global growth accelerating from 3.6% this year to 3.7% in 2018, noting that “Broad-based upward revisions in the euro area, Japan, emerging Asia, emerging Europe, and Russia more than offset downward revisions for the United States and the United Kingdom.”

Emerging markets will turn in growth of 4.6% in 2017 and 4.9% next year. Closer to home, the IMF’s MENAAP region — which adds Afghanistan and Pakistan to MENA — will grow 2.6% this year and 3.4% in 2018. Hop to page 14 of chapter 1 for the full growth table (pdf).

Investment flows to emerging markets could suffer could suffer thanks to monetary policy shifts in developed economies. The report’s authors argue in this semi-annual update that “faster-than-expected monetary policy normalization in the United States could cause reversals in capital flows to emerging markets and an appreciation of the USD, imposing strains on economies with high leverage, balance sheet mismatches, or exchange rates pegged to the UDF.” This comes despite total non-resident capital inflows to EM having averaged USD 200 bn in each of the first two quarters of this year, up from a quarterly average of USD 120 bn in 2015-16.

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