HSBC sees the Egyptian economy growing at a 2.5-3% clip in FY2020-2021 as strong economic fundamentals help the country weather the worst of the economic fallout caused by the covid-19 pandemic, according to a research note picked up by the local press. Growth will remain weak for the remainder of 2020, but the outlook over the next 18 months remains positive, with output likely picking up in 2021, the bank said. HSBC’s forecast is significantly below the Finance Ministry’s estimate, which sees GDP growing at a 5% clip this fiscal year.

Egypt’s success at securing international funding and attracting bond investors underlines the country’s economic stability, analysts wrote. The country has obtained USD 8 bn in loans from the IMF and a USD 50 mn facility from the World Bank to help it cope with the effects of the pandemic, while its USD 5 bn eurobond issuance in May was well received by foreign investors.

HSBC sees the budget deficit widening to 9% of GDP by the end of the current fiscal year from 7.8% last year, almost reversing two years’ of progress that saw the deficit narrow from 9.8% in FY2017-2018. The government currently expects the deficit to narrow further to 6.3% this year.

Pressure on Egypt’s key sources of hard currency will continue: Suez Canal revenues will remain weak amid a slowdown in global trade while the tourism sector will take time to recover from the suspension of international travel earlier in the year. Remittance flows will depend to a large extent on the trajectory of the Gulf economies. Recessions in countries with large Egyptian workforces could reduce demand for Egyptian labor as governments look to provide jobs for the local populations.