EXCLUSIVE- Global slowdown could hit economic growth -sources: The Finance Ministry could revise down its growth projections to 6% from 6.5% due to the global economic slowdown, two government sources told us. The budget factored in average global growth at 3.3%, but this looks increasingly unlikely as global conditions continue to deteriorate. “We might not achieve our targeted growth rate,” the sources said, adding that it is unlikely to drop below 6% due to improvements in the industrial and tourism sectors.

Gov’t spending set to fall on lower oil prices, global easing: The Finance Ministry may revise downwards its spending forecasts for oil subsidies and debt service payments amid the continued slump in oil prices and global monetary easing, two government sources told us. The ministry could announce the new projections in September, after economic data for 1QFY2019-2020 is released.

Savings expected from lower interest payments…: Pressure on the world’s central banks to cut rates and counter the slowdown in global growth could lead to a smaller interest bill on bonds listed on foreign stock exchanges, the sources said. Debt service payments, which are expected to amount to EGP 569 bn this fiscal year, eat up some 36% of the state’s budget. Any reduction in interest rates, therefore, would lead to a lower budget deficit and debt-to-GDP ratio. The ministry announced in a statement last week new plans to reduce debt-to-GDP to pre-2011 levels of 77.5% by the end of FY2021-2022, lower than the 80% target announced in March.

…And a fall in the oil subsidy bill: The approved FY2019-2020 state budget (pdf) uses a benchmark crude price of USD 68/bbl. Crude oil futures, however, have been trading at below USD 57/bbl for the good part of the fiscal year. Bloomberg analysis conducted last year suggests that EGP 3-4 bn (USD 222 mn) is added to annual spending for every USD 1 increase above the benchmark price.

But tax revenues may fall short of expectations: Customs tax will likely fall this year on lower imports, while global headwinds may impact corporate profits.