World Bank says tourism rebound, gas exports driving strong growth in Egypt: The World Bank has laid out the drivers for its January prediction that our economy will grow 5.5% in FY2021-2022, pointing to a recovery in the tourism sector and rising gas exports. “A gradual return of tourists, continued growth in the technology sector, an uptick in gas extractives and expansion in the construction and real estate sectors will all support an expansion of aggregate demand,” World Bank economists wrote in its latest Egypt Economic Monitor.

Pandemic recovery in full swing: “Egypt is expected to revert to its pre-pandemic growth path over the forecast horizon and continue to push ahead with fiscal consolidation,” assuming the covid-19 pandemic continues to abate, the report says. Egypt’s economy delivered 5.6% growth in the year prior to the pandemic but fell to 3.3% in FY2019-2020.

But the government needs to do more. Policymakers will need to continue with structural reforms and attract private investment if it is to maintain the same growth trajectory in the coming years, the report says. Foreign direct investment — which the bank expects to remain below pre-pandemic levels through to 2022-2023 — is unlikely to increase in the non-oil economy unless serious reforms are implemented.

Budget deficit to narrow (though by less than expected): The budget deficit is likely to narrow to 7.2% by the end of the current fiscal year from 7.9% last year, as economic growth and the government’s efforts to digitize tax collection and customs increase revenues. The Finance Ministry currently sees the deficit standing at 6.9% at the end of fiscal year in June, narrowly missing its original 6.7% target.

As will the current account deficit: The current account deficit is expected to narrow gradually as trade, travel and gas exports increase, the report says. Despite increasing the import bill, rising oil prices should have a positive impact on the current account by boosting remittances from Egyptians working in the Gulf. That said, much of these gains will be offset by rising non-oil imports.

But debt is an issue: “Elevated debt levels, large rollover needs, and tightening global financial conditions could heighten the country’s susceptibility to external financing pressures,” the report says. Counting in our favor is that only a small portion of the country’s external debts are short-term, with the bulk of money owed to multilateral lenders with favorable maturity periods. The World Bank expects Egypt’s debt-to-GDP ratio to rise to 93% by the end of June, missing the target set by the government, which wants to get it below 90%.

Read the report: View the landing page here or check out the full report here (pdf).