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Tuesday, 21 February 2023

EBRD predicts slower GDP growth in 2023

The European Bank for Reconstruction and Development (EBRD) now sees Egypt’s GDP growing at a 4.6% clip in 2023, down 1.0 percentage point from its 5.6% estimate in September, according to updated projections (pdf) out last week.

On an FY basis: The London-based bank is expecting the domestic economy to grow at a 4.3% clip in the current fiscal year, which runs through June, down from its previous estimate of 4.7%. It sees GDP coming in at 5.0% in its first prediction for next fiscal year.

More optimistic than some: The IMF and the Madbouly government see GDP growing 4.0% this fiscal year. A recent Reuters poll predicted growth of 4.8% in the current fiscal year, while the World Bank expects 4.5%, and Fitch has penciled in 4.4%.

The rationale: The lender took note of a slowdown in the most recent official growth figures to 4.4% in 1Q 2022-2023, down from 9.8% in the same period a year earlier, on the back of higher commodity prices, “lower investor sentiment, higher borrowing costs and greater pressure on external accounts.” It also pointed to drag on the economy thanks to the latest depreciation of the EGP and high inflation, which have led the state to make cutbacks and squeezed local demand.

On the upside: “The implementation of structural reforms, supported by the IMF program, and the shift to a durably flexible exchange rate regime are expected to relieve the pressure on external financing and accelerate reforms,” the EBRD writes, forecasting growth to improve in the medium term thanks to a stronger private sector.

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