Back to the complete issue
Sunday, 24 January 2021

Slow tourism recovery will weigh on GDP this year, but we’ll bounce back

Egypt’s economy will grow 2.4% this fiscal year “amid sluggish global tourism recovery and weak domestic demand,” but will accelerate to 4.1% in FY2022-2023, the Economist Intelligence Unit (EIU) said in its January report. The forecast for the current fiscal year is below the lower end of the Finance Ministry’s recently updated forecast, which targets a range of 2.8-4%. The EIU expects real GDP growth to rise over the next three fiscal years, peaking at 5.7% in FY2024-2025 before cooling off slightly to 5.2% in FY2025-2026.

The caveat: The recovery in vital sectors such as tourism — accounts for 9.5% of employment and 5.5% of GDP will “depend heavily” on how consumer demand in the EU recovers and a speedy vaccination program. The EIU expects a large-scale rollout of vaccines around the world in 2Q2021 in developed economies, while the rollout of vaccines “at scale” in middle-income and emerging economies is unlikely to happen before 2022. This pace suggests the global “mass coverage” milestone will only be hit by the end of the year.

The government will likely keep in place fiscal and monetary support measures for the tourism sector while withdrawing it from other sectors as the pandemic begins to taper off in 2H2021, the report predicts. While state coffers “will be tested” in their ability to roll out more relief after having raised the minimum wage and pensions, as well as hiking the exemption threshold for income taxes, other “pandemic-related tax-relief measures and tariff cuts” will be rolled back to rebuild public finances, the report says.

OTHER INDICATORS: The EIU sees Egypt’s fiscal deficit widening to 8.5% of GDP this fiscal year, sees inflation “subdued” this year at about 5.9%, and sees the EGP strengthening by 2025, although it will be susceptible to “bouts of volatility” this year from “negative sentiment towards emerging economies in global financial markets, or to a weakening of the current-account position.” The EIU expects the EGP to weaken slightly in FY2021-2022 before the FX rate settles at EGP 15.52 / USD 1 in FY2024-2025.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.