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Sunday, 29 January 2023

Economy to grow 4.8% this fiscal year -Reuters poll

The economy could grow more than the gov’t thinks this fiscal year: The economy will grow at a 4.8% clip in FY 2022-2023, according to a Reuters poll of economists. That’s down from 6.6% last year, but above government forecasts. The Madbouly government is currently predicting GDP growth to come in at 4.0% this year, down from its previous forecast for 5.0% growth. Preliminary figures released in November indicated that the economy grew by 4.4% during 1Q.

Consensus among international players is that growth come in at about 4.5% this year: The World Bank is expecting our economy to grow 4.5% for the current fiscal year, while the IMF and Fitch are both predicting 4.4% growth tempered by inflation, a slowdown in public investments and a belated recovery for the tourism sector.

Erring on the side of caution: The government unveiled its most recent forecast in a letter of intent (pdf) sent to the IMF to secure its USD 3 bn loan. “Uncertainty surrounding the growth forecast is particularly large at this juncture and risks are skewed to the downside given the challenging external environment, namely tighter financial conditions, and high food and energy prices,” it wrote.

Speaking for the downside risk: Callee Davis, economist at Oxford Economics Africa, tells Reuters she believes growth will weaken to just 1.4% this year and 3.0% over the medium term on lower receipts from the privatization program and a slowdown in state spending on infrastructure projects.

Medium-term growth below gov’t / IMF forecasts: The Reuters poll returned median growth forecasts of 4.5%, 5.3%, and 5.4% during the next three fiscal years. This is lower than the IMF’s projections for 5.3%, 5.7%, and 5.9% growth,and below the government’s medium-term forecast for 5.5-6% growth.

A surprise strengthening of the exchange rate? The economists Reuters polled see the currency strengthening to 26.24 to the greenback by the end of the current fiscal year in June, from 29.94 currently. The EGP will then weaken again to 28.50 during the following year, according to the survey.

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