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Sunday, 19 January 2020

Egypt expected to have highest GDP growth in North Africa, debt sustainability remains a concern -UN

Egypt’s GDP growth forecast among the highest in North Africa, debt sustainability remains a concern -UN: Egypt’s GDP is expected to grow at a 5.8% clip in 2020 and 5.3% in 2021, one of the highest in North Africa, according to the United Nations’ 2020 World Economic Situation and Prospects report (pdf). Growth will be spurred by recovering domestic demand and easing pressures on the country’s balance of payments, while the expectation of further rate cuts, the government’s improving fiscal position, greater exchange rate stability, and higher levels of reserves all contribute to a positive outlook for the country’s economy, the report says.

What the continent’s economic outlook is looking like: Growth in North Africa is expected to be driven by domestic demand in 2020, as expanding populations in countries such as Egypt continue to provide large markets for companies and investors. However, the short-term risks across African subregions are tilted to the downside due to weather-related shocks, political conflicts, and social and security matters posing uncertainty in the continent. The UN says it is unlikely that the region’s governments will achieve a key development goal of eliminating extreme poverty by 2030. In Egypt, the percentage of the population living below the poverty line increased to 32.5% during FY2017-2018, up from 27.8% in 2015.

Africa’s debt addiction is raising concern: Egypt, Benin, and Ghana collectively raised more than USD 7.6 bn from issuing eurobonds, marking a recent upsurge in the issuance of foreign currency-denominated bonds in Africa. Egypt successfully issued USD 2 bn-worth of USD-denominated eurobonds in a triple-tranche issuance that went to market last November, and is expected to be the final USD-denominated issuance for the fiscal year, Finance Minister Mohamed Maait told us last week. The report says this uptick in debt has raised concern over the sustainability of these countries’ debts as the growth outlook remains fragile and a mismatch persists between debt maturity and the timelines of the projects the proceeds are used to fund.

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