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Egypt Economic Growth Seen Quicker than Government Forecast

Egypt Economic Growth Seen Quicker than Government Forecast

Thursday, 26 January, 2023 - 09:00
Egyptian farmers pick strawberries early from a field in the city of Toukh, east of the Cairo Nile. (AP)

Egypt's economy will grow 4.8 percent in the current fiscal year, faster than predicted by the government, but will not meet government targets over the medium term, a Reuters poll showed on Wednesday.

The predictions follow the approval last month of a $3 billion financial rescue package from the International Monetary Fund, sought after the war in Ukraine hit tourism, raised commodity prices, and prompted foreign investors to pull about $20 billion out of Egypt's financial markets.

Median forecasts in the Jan. 9-24 Reuters poll of 18 economists for the fiscal year ending on June 30 were above the 4.0 percent growth the government predicted in a Nov. 30 letter of intent to the IMF.

However, for the subsequent three years, the poll predicted growth of 4.5 percent, 5.3 percent, and 5.4 percent, less than the government's medium-term outlook.

"Over the medium term, as immediate pressures abate and with the implementation of our structural reform agenda, growth is projected to increase to between 5.5 percent and 6 percent," the government said.

Callee Davis of Oxford Economics Africa doubted Egypt would reach that, as it was unlikely to raise as many funds as projected over the next four years through its privatization drive.

This would result in growth slowing to 1.4 percent this fiscal year and 3.0 percent over the medium term, Davis said.

"We also see government investment-driven growth slowing as infrastructure projects requiring dollar investment are put on the back burner," she added.

The poll forecast annual urban consumer price inflation climbing to 13.4 percent in 2022/23 and 16.6 percent the following year before settling at 8.8 percent in 2024/25. This would put it back within the central bank's target range of five percent-nine percent.

Egypt's annual inflation rose to 21.3 percent in December, its highest in five years, the state statistics agency CAPMAS said this month, driven up by weakening currency and import controls.

The Egyptian pound, which closed at 29.90 to the dollar on Wednesday, will strengthen to 26.24 per dollar by end-June 2023 but weaken again to 28.50 by June of the following year, the economists forecast.

The central bank's overnight lending rate, currently at 17.25 percent, is expected to drop to 15.00 percent by end-June before declining to 9.75 percent by end-June 2026, the poll found.

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