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Tuesday, 14 April 2020

FinMin leaves FY2020-2021 GDP growth figures unchanged from pre-covid expectations

BUDGET WATCH- In a climate of global uncertainty, the Finance Ministry is leaving its projection for FY2020-2021 GDP growth unchanged for the moment, suggesting the figure will come in at 4.5%, according to the draft budget (pdf) released yesterday. The document makes explicit that the ministry will revisit its growth assumptions as the economic impact of the covid-19 pandemic becomes clearer.

The budget was released as policymakers suggested Egypt could still escape a recession, with Deputy Planning Minister Ahmed Kamaly suggesting yesterday that growth could still clock in at 1% in this final quarter of the state’s fiscal year, according to Reuters. Kamaly was speaking at a press conference yesterday. Masrawy also has coverage.

The budget was drafted before the worsening of the covid-19 crisis, and Finance Minister Mohamed Maait and Vice Minister of Finance Ahmed Kouchouk told us in early March the government would likely need to rethink its growth and budget targets in light of the covid-19 outbreak.

President Abdel Fattah El Sisi had reviewed the draft budget last month before shipping it to the House of Representatives for approval. The House needs to sign the budget into law by the end of June and in time for the start of the fiscal year on 1 July. MPs are due back at their benches in the House by 29 April, and the budget is near the top of their agenda.

The budget deficit is expected to narrow to 6.3% of GDP, from 7.2% in the current fiscal year.

Revenues are forecast to rise 13.6% y-o-y to reach EGP 1.28 tn, outpacing the anticipated 8.8% uptick in state spending, which is expected to come in at EGP 1.71 tn. Other highlights:

  • Spending on healthcare will rise 45% to EGP 254.5 bn. This includes a 75% bump in wages and bonuses for medical workers, which will cost an extra EGP 2.25 bn;
  • Social welfare spending will climb 2.7% to EGP 19 bn;
  • Commodity subsidies have been allotted EGP 84.5 bn;
  • The public wage bill will rise EGP 34 bn as civil servants will be granted higher annual raises and the threshold for personal tax exemption has been raised.

Also in the forecast:

  • Primary budget surplus: 2%;
  • Public debt: 82.8% of GDP;
  • Average oil price: USD 61 / bbl.

The Planning Ministry has already revised downward its growth projections for Egypt’s economy: Minister Hala El Said had said last month that GDP was expected to grow at a 4% clip during the final quarter of the current fiscal year, which would bring growth in FY2019-2020 to 5.1% (down from initial forecasts of 5.6%). Kamaly and El Said did not provide a revised growth forecast for the full fiscal year based on the revised 4Q projections. The state budget had targeted 6% growth for FY2019-2020.

Tourism revenue projections have also been revised downward to USD 11 bn from USD 16 bn this fiscal year, the minister said, according to Reuters. Tourism revenues came in at USD 7.2 bn for the first half of the current fiscal year.

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