Egypt’s GDP to grow 2.8% this FY + IMF is out with a more optimistic global forecast
Egypt’s economy will grow at a 2.8% clip in FY2020-2021, according to a Reuters poll of economists. This is a downwards revision from the 3.3% growth economists predicted in the last poll the newswire conducted in October. The forecast sits at the lower end of the Finance Ministry’s most recent GDP growth target range, which it set at 2.8-4.0%. The poll’s expectations are also on par with the IMF’s most recent growth outlook for Egypt.
The downgrade is attributed to the downturn in the tourism industry, which was also the key factor for muted growth economists cited in the October poll. HC Securities’ Monette Doss points to expectations of “weak tourism receipts” through the rest of the fiscal year as being “the main drag on the economy.” Some 3.7 mn tourists visited Egypt in 2020 — a 75% y-o-y drop from a record 13 mn in 2019.
A rebound in growth over the next two fiscal years is still in the cards, the economists predict, albeit at a slightly lower rate in FY2022-2023 than they previously expected. The economy is still on track to grow 5% in FY2021-2022, and will expand at a 5.4% clip the following fiscal year — down from the most recent forecast of 5.5%.
Private-sector investment will drive growth, spurred on by lower rates and higher public spending, Doss says. The economists predict that the central bank’s overnight lending rate will be cut 100 bps to sit at 8.25% by the end of June 2021, remaining steady until June 2023, when the central bank could raise rates by 25 bps to 8.50%.
Inflation is still expected to decelerate in FY2021-2022 before rising over the next two years: Economists now expect annual urban consumer price inflation to come in at 5.6%, two percentage points weaker than the last time around, but have held firm on their expectation that inflation will come in at 7% in FY2022-2023 and FY2023-2024.
And the EGP is seen sliding less than before: The currency is now expected to hover at EGP 16.11 to the greenback by December 2021, from its current EGP 15.67, rather than EGP 16.50 as in the previous poll. In 2022 economists see the currency weakening further to EGP 16.63, but this is also a more upbeat forecast than the previous poll.
And as for the rest of the world …
The IMF sees the global economy mounting a more rapid recovery this year after last year’s smaller-than-expected contraction. In its updated World Economic Outlook, the fund see the world economy growing 5.5% in 2021 — 0.3 percentage points higher than its expectations three months ago — “reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.” Growth forecasts for next year are now at 4.2%.
Emerging markets will grow 6.3% in 2021, the fund says, up from its last forecast of 6.0%.
Thanks to a low base effect, we’re going to see EM-type growth from the US of A, with the Biden administration on track to claim 5.1% growth in 2021.
But we’re not out of the woods: The ongoing second wave of covid and the emergence of new strains of the virus will dampen many economies in 1Q2021. Tap / click here to read the full report (pdf).