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Egypt maintains stable economic outlook: FocusEconomics - Daily News Egypt

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Egypt maintains stable economic outlook: FocusEconomics

GDP expected to expand 3.1% in FY 2017 and 3.9% in FY 2018, according to the report

Egypt’s economic outlook looks stable, as growth picked up slightly during the period between January and March because of increased investments and a resurgent external sector. According to FocusEconomics “Middle East & North Africa” June 2017 report.

Various other indicators show signs that the economy is recovering, with industrial production soaring. PMI is gradually improving from November’s nadir, in addition to the fact that foreign reserves in April reached their highest level since March 2011, said the report.

In May, the International Monetary Fund (IMF), agreed to the second loan instalment worth $1.25bn, and endorsed the economic reform programme adopted by the authorities. Taking advantage of such endorsement, Egypt tapped bond the markets to the tune of $3bn in a heavily oversubscribed sale.

However, FocusEconomics panelists forecast that the Egyptian economy will lose steam in fiscal year FY 2017—ending on June 30—as a result of the fiscal consolidation measures, which reduced economic activity, in addition to inflation, which sapped private consumption.

Yet, according to the report, growth should pick up as the country reaps the rewards of painful structural reform measures and an improved business environment. Analysts expect GDP to expand 3.1% in FY 2017 and 3.9% in FY 2018.

Egyptian households are taking a hit because of skyrocketing inflation, as a result of the currency flotation—which took place in November—and fuel subsidy cuts, meaning private consumption likely remains depressed. Inflation has hit public spending as well, which is likely to be subdued, as the government takes a prudent fiscal approach in order to reduce the budget deficit in line with the objective set out in the 2017 budget.

In regards to Egypt’s external sector, it has witnessed a turnaround since the start of the year with a surge in exports in Q1 as firms reap the rewards of a substantial jump in price competitiveness, thanks to the weaker pound.

On the other hand, imports have diminished, as firms and consumers switched to domestic alternatives, with the overall trade deficit narrowing. In addition, tourists arrivals started to pick up in Q1, as a result of the lifting of travel bans by many European countries, as well as the promotional campaigns.

In regards to the real sector, the report cites that the Emirates NBD Egypt Purchasing Managers’ Index (PMI) has decreased from a nine-month high of 47.4 in April to 47.3 in May, staying stubbornly below the 50-point threshold that separates contraction from expansion in the non-oil producing private sector.

Despite the signs of recovery that are witnessed, Egyptian firms are still struggling and are being squeezed by weak domestic demand and soaring input costs due to currency devaluation and soaring inflation.

“Egypt’s private sector appears to be stabilising, with the PMI largely unchanged from April. Encouragingly, new exports orders rose at the fastest rate on record in May, suggesting that the sharp devaluation of the pound in November is having a positive impact on exports,” said Khatija Haque, head of MENA Research at Emirates NBD,

Focus Economics panelists expect that total investment will grow 6.4% in fiscal year 2017 and that total investment will increase 5.8% in fiscal year 2018.

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