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Wednesday, 8 June 2022

World Bank revises FY 2021-22 growth forecast up to 6.1%

The World Bank has again revised upwards its projection for Egypt’s GDP growth by 0.6 percentage points to 6.1% for FY 2021-2022. The bank in January expected growth to come in at 5.5%, but “stronger-than-expected activity for the first half of the fiscal year” saw it hike its forecast in its latest Global Economic Prospects report.

The forecast tallies with gov’t projections: The government has revised upwards its 2021-2022 growth outlook to 6.2% on the back of figures for 3Q 2021-2022, which saw the economy grow at a 5.4% clip. The Planning Ministry had in March cut its full-year forecast to 5.7% due to the war.

You can read the full report (pdf) here, or visit the landing page here.

The impact of war in Ukraine won’t be fully felt this fiscal year: The first half of the fiscal year (July-December 2021) saw a “boom” in growth that was “only partly offset by repercussions from the war in Ukraine,” the World Bank wrote. Growth began to slow in early 2022, the lender added.

Growth is set to moderate going into next fiscal year: The bank cut its forecast for Egypt’s growth next fiscal year to 4.8%, down from the 5.5% it predicted in January, as “rising food and energy inflation slows income growth and raises input costs in key sectors, and tourism flows moderate.” Inflation rose to a near three-year high in April as rising food costs and the devaluation of the EGP in March caused consumer prices to grow at a faster pace.

We’re vulnerable on food security, the WB notes: Our reliance on wheat imports from Russia and Ukraine (which usually account for more than 8% of our imported grain) exposes us to rising food prices, the report says. (Remember: We could soon be in line for some USD 500 mn from the World Bank for wheat imports and other food security measures).

On the upside: Gas exports + remittances will bring us a boost. Elevated prices in the gas extractives sector, remittances from the GCC, and “continued reform momentum” will support local growth looking ahead, the WB said.

ZOOMING OUT- The lender upped its forecast for GDP growth across the MENA region by 0.9 percentage points to 5.3%, thanks to soaring oil prices, as well as structural reforms in economies including our own, the KSA, and the UAE, and the diminishing adverse impacts of covid-19.

That’s the fastest pace of growth the region has seen in a decade — but it “could have been even stronger had it not been for the detrimental impact of Russia’s invasion of Ukraine on oil importers,” the lender said. Growth is expected to slow to 3.6% in 2023 and 3.2% in 2024.

Globally, things aren’t looking great as recession looms: The WB cut its global growth projections by almost a third to 2.9% in 2022, and down from 5.7% in 2021. “The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank Group President David Malpass said.

Stagflation is a real threat: The combination of prolonged high inflation and subdued growth could throw the global economy back into a 1970s-style stagflation situation, Malpass warned. “The danger of stagflation is considerable today,” he said, adding that “subdued growth will likely persist throughout the decade because of weak investment in most of the world.”

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