Egypt’s economy will be back near its pre-pandemic growth rate in 2022, coming in at 4.9% compared to the 5.6% recorded in 2019, according to estimates in the African Development Bank’s (AfDB) 2021 Economic Outlook report (pdf). While our economy grew at a 3.6% clip last year “despite the relatively severe health impact of the virus in the country,” the pandemic has exacerbated our short-term refinancing needs and exposed structural vulnerabilities, the report said.

High domestic consumption was key to Egypt avoiding contraction, bucking a trend that gripped most world economies. Cushioning the blow: strong fiscal buffers after years of consolidation, which kept the overall budget deficit unchanged at 8% of GDP in 2020; slowing inflation, giving room for monetary expansion and allowing exports to grow faster than imports. (Still consumption is not always the most sustainable driver.)

Growth is expected to remain subdued at 3% in 2021 as tourism is capped by the pandemic, keeping prospects for overall goods and service exports muted. Weak growth in Europe, Egypt’s largest trade partner and main inbound tourism market, is also expected to hamper the recovery. Previous forecasts by the IMF and Fitch Ratings, had put growth between 5 and 5.5% in FY2021-2022.

Weak private investment is also forecast to weigh on the outlook for the coming year, though capex could pick up over the medium term as a result of an “improved investment climate,” the bank said.

Covid-19 made exaggerated Egypt’s already significant refinancing, with 60% of government debt set to mature in one year or less, according to the report. The report notes that recent credit facilities lengthened the average maturity of public debt, with Egypt receiving a combined USD 8 bn in covid financing and tapping the international debt market with a USD 3.75 bn bond sale last month, and a record USD 5 bn sale last year. But more needs to be done to further extend the tenor of debt, with Egypt’s total debt stock projected to grow 90.6% this year before falling back to 77.2% in 2025, the report notes.

And “serious debt challenges might be looming” for the continent at large: Average debt-to-GDP ratio for African countries is seen climbing 10-15% in the short-to-medium term to reach 70-75% in 2021 with “direct implications” on budgets and debt burdens, the bank said.

Overall, Africa’s GDP is forecast to grow an average 3.4% this year, reversing a 2.2% contraction in 2020 as tourism gradually resumes, commodity prices rebound, and governments ease pandemic restrictions, the AfDB said.

Egypt’s 2020 3.6% growth rate helped buoy North Africa economies, with the region only collectively contracting an estimated 1.1% in 2020, the report said.

Egypt should continue implementing structural reforms “to catalyze private sector development and enhance domestic resource mobilization,” in order to maintain a long term growth rate supported by more than domestic consumption, the bank concluded