Back to the complete issue
Wednesday, 7 November 2018

IIF sees Egypt growth falling to 4% in 2022 unless policymakers go for deeper structural reforms

IIF sees Egypt growth falling to 4% in 2022 unless policymakers go for deeper structural reforms: The Institute of International Finance (IIF) sees growth in Egypt falling to 4% in 2022 from an estimated 5% in the state’s current fiscal year “due to structural bottlenecks and a less favorable global environment, including tighter financial conditions and uncertainty over the global trade system,” it said in a late October country report.

A new reform agenda? To sustain the growth rates of the past two years, policymakers will need to “make the economy more responsive to market forces and empower the private sector … Laws and regulations governing business and investment need to be overhauled and brought in line with best practices in successful emerging economies.” Among the keys: Driving exports, improving the efficiency of land allocation, strengthening competition and public procurement and cutting corruption, the IFF said, adding, “The country needs to create more freedom and space for private-sector initiative, facilitating growth of SMEs.”

No interest rate cuts before 2019: The IIF expects inflation to decline to single digits and the CBE to keep its key interest rates unchanged until it achieves its target of 13% (±3) in 4Q2018. “Once headline inflation declines to below 10% and demand pressures remain contained, the CBE may ease the monetary stance, most likely in 2019,” the report said.

Is US monetary tightening the biggest external risk to Egypt? A “faster-than-expected US monetary tightening … would hit appetite for Egypt’s eurobond issuances,” IIF writes, noting, “External risks have increased in recent months, with a shift to net portfolio capital outflows as global financial conditions have contributed to a pullback from EMs. However, Egypt’s narrowing external and fiscal deficits, falling core inflation, and adequate level of reserves will help the economy cope well with any acceleration in capital outflows.”

Public debt-to-GDP ratio in decline for the first time in a decade: The report highlights that Egypt’s public debt ratio starting to decline for the first time in nearly a decade is definitely a positive sign.It expected the ratio to start declining to “levels consistent with long-term sustainability due to high nominal GDP growth and the authorities’ fiscal consolidation plan” – which includes further reductions in fuel subsidies and more stepping up taxes.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.