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Thursday, 7 November 2019

EBRD sees strong growth for Egypt despite regional headwinds

EBRD sees strong growth for Egypt despite regional headwinds: The European Bank for Reconstruction and Development (EBRD) expects Egypt’s economy to grow at a 5.9% clip in FY2019-2020, bucking a weak growth trend in the southern and eastern Mediterranean region. The bank says in its latest regional outlook growth will be driven by “a further strengthening of the tourism sector and of exports, as well as large public construction projects.” Egypt’s GDP expanded at a 5.6% clip in 1Q FY2019-2020, Planning Minister Hala El Said noted last month, while the government is targeting GDP growth of 6% across the entire year.

Other positive factors: The Central Bank of Egypt’s monetary easing cycle, has cut rates by 250 bps since August, is expected to encourage more foreign and domestic private sector “re-engagement.” Another growth-supportive aspect is “the continued implementation of business environment reforms.”

Key risks: The “erosion of competitiveness” due to the EGP’s steady year-to-date appreciation and a negative economic outlook in the EU, Egypt’s leading trade partner, are the main risks to the EBRD’s rosy outlook on Egypt. This can be, in part, mitigated by the continued implementation of structural reforms. The bank also describes “a persistent wait-and-see approach” by investors, that could hold back inflows going forward.

Average growth in the region is expected to come at 4.4% in 2019 and 4.8% in 2020. Morocco is forecast to be the second-fastest growing economy at 2.6%.Political and security concerns in Tunisia and Lebanon, a dwindling agricultural sector in Morocco and delayed reforms in Jordan led the bank to revise its expectations downward by 0.2% in 2019 and 0.3% in 2020.

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