Egypt skated past covid-19, but now needs to double down on “deep” reforms –IIF
Egypt weathered the worst of the pandemic as the only MENA country to see economic output contract last year, but authorities need to push on with “deep” structural reforms to keep the momentum going in the long run, the Institute of International Finance said in a report cited by Gulf News. The economy managed to avoid a textbook recession, which is defined as two consecutive quarters of below zero growth, thanks to “timely and effective public health response, deployment of a comprehensive set of fiscal and monetary measures, and adequate funding from the International Monetary Fund,” the IIF’s MENA chief economist, Garbis Iradian, said.
Sound smart: Should I trust the IIF? They have a good track record of commentary on macro issues, but keep in mind that they are a lobby group for the global finance industry with nearly 450 members across 70 countries. Members include central banks, brokerages, banks, stock exchanges and asset managers
Are any Egyptian institutions members? Yep. Look no further than the Central Bank of Egypt, CIB, NBE, AAIB, Banque Misr, Arab International Bank, Housing and Development Bank and QNB AlAhli. Cairo-headquartered Afreximbank is also a member.
IIF expects Egypt’s economy to grow 2.3% in the state’s current FY2020-2021 after having recorded 3.6% in the previous fiscal year. Those figures are more or less in line with most other forecasts — including by economists, the government (pessimistic range), and the IMF. Growth could bounce back to pre-pandemic levels in FY2021-2022, EFG Hermes said in a recent report.
Where we got brownie points: The USD 2.8 bn rapid financing instrument and USD 5.2 bn stand-by facility the government agreed with the IMF earlier during the pandemic, as well as a raft of medical, fiscal, and monetary measures that were introduced early on and in quick succession from March. The IIF is also “encouraged by the progress made in digital transformation, which could also improve competitiveness and raise the productivity of labor and capital. The pandemic has accelerated demand for e-commerce,” Iradian said.
Some structural challenges remain untackled: State and military involvement in the economy, regulatory hitches, a lack of competition, and weak governance and institutions could all use some work, says IIF.
What’s the best way forward? Empower the private sector, including by reforming public procurement and getting more done through the private sector.
There are risks Egypt needs to be mindful of: The growth outlook is still exceptionally uncertain as it depends heavily on how the pandemic plays out and how successful the vaccine rollout is both in Egypt and elsewhere, the IIF warns. It’s still unclear if the new covid variants will lead to a strong resurgence in cases worldwide, it added.