In Focus Economics’ monthly Consensus Forecast’s report for May 2017 about the Middle East and North Africa stated that Egypt’s economy “seems to be gradually picking itself up, according to recent data.” The report said that the Purchasing Managers’ Index (PMI) rose to its highest levels in nine months by April, in spite of the deteriorating economic situation.
“Industrial production has surged so far this year, making up some of the ground lost in 2016, while the Central Bank’s reserves shored up again last month as investors flock back to the country. Inflation looks to be near peaking, albeit at an excruciatingly high rate, with consumers’ purchasing power withering as a result,” the report read.
Focus Economics said that currently, the International Monetary Fund (IMF), is in Cairo to assess the country’s progress after a bailout deal was signed last November, with a view to releasing the second tranche of funding in the coming months, according to the report.
“The economy is expected to lose steam in [fiscal year] FY 2017, as fiscal consolidation measures dampen economic activity, while elevated inflation saps private consumption,” says Focus Economics.
Moreover, analysts expect GDP to expand 3.1% in FY 2017, which is up 0.1 percentage points from last month’s forecast. “For FY 2018, the panel sees growth accelerating to 3.8%.”
The report expects that the inflation rose from 30.2% in February to 30.9% in March. However, it is expected that inflation would record an average of 22.4% in the calendar year 2017 and 13.9% in 2018.
Focus Economics said that the Emirates NBD Egypt’s PMI ticked up from 45.9 in March to 47.4 in April, recording the highest reading in nine months.
“The result indicates a softer worsening of business conditions, with the indicator remaining below the 50-point threshold that separates contraction from expansion in the non-oil producing private sector,” the report read.
The report expects total investment to grow 6.4% in FY 2017. The panel expects total investment to increase 6.0% in fiscal year 2018. The government targets a growth of 5.2% in FY 2017 and 4.6% in FY 2018.
“Focus Economics Consensus Forecast’s panelists, however, expect the economy to expand at a more moderate pace of 3.1% in fiscal year 2017, which is up 0.1 percentage points from last month’s forecast. For fiscal year 2018, the panel expects economic growth at 3.8%.”
Focus Economics stated that the price pressures “are likely to ease in upcoming months,” in spite of the upcoming fresh wave of subsidy cuts—expected towards the end of the year—will ensure price adjustments continue.
The report added that inflation is expected to remain at double digits in both 2017 and 2018.
Focus Economics expects that inflation will record an average of 22.4% in calendar year 2017, which is up 0.1 percentage points from last month’s projection. “For calendar year 2018, the panel sees average inflation of 13.9%,” the report concluded.