Fitch has cut Egypt’s GDP growth forecast for FY2022-2023 to 4.4% from a prior projection of 5.5%, saying the economy will grow more slowly next fiscal year due to inflationary pressures, it said in its monthly outlook on North Africa.

What they said: “We estimate that growth has slowed to 3.6% in 1H2022 and will continue to weaken over the coming quarters as a double-digit inflation weighs on household income, public investment slows and a full recovery in the tourism sector is delayed,” Fitch Solutions said.

REMINDER- Egypt’s annual inflation hit a three-year high of 13.5% in May as rising global commodity prices and the devaluation of the EGP put upwards pressure on consumer prices, leaving it further outside of the central bank’s 7% (± 2%) target range.

It’s not only us: Fitch says it holds a “pessimistic macroeconomic outlook” for most North African countries after the Russian invasion of Ukraine sent food and energy prices soaring. Hardest hit will be the region’s net oil importers Morocco, Egypt and Tunisia, as the crisis weighs on their economic activity and fiscal and external deficits, it said.

North Africa’s real GDP growth will decelerate from 5.4% in 2021 to 4.2% in 2022 and 3.8% in 2023, Fitch predicts, as inflation and monetary tightening continue to impact private consumption and slower economic growth in Europe hits exports.

Higher rates across the region? Central banks will continue a monetary tightening cycle, Fitch predicts, forecasting the Central Bank of Egypt (CBE) to hike interest rates by an additional 100 bps during the remainder of 2022 in a bid to bring inflation down. The CBE has hiked rates by 300 basis points (bps) since March, when it also allowed the EGP to slip against the USD. Most analysts we polled expect the bank to keep rates unchanged in its upcoming meeting on Thursday, though many are also predicting another 50-200 bps in hikes by the end of the year.