A recent report issued by Focus Economics has expected Egypt economy to be solid in the coming period, boosted by investment.
The report said that the economic recovery firmed up in the April–June period according to recently-released figures.
“This was likely due in part to an improved net external sector contribution, with exports up sharply in H1 thanks to improved price competitiveness, and imports plummeting as import restrictions bore fruit,” the report added.
“Strong investment growth likely played a key role too, as investors reacted positively to the government’s ambitious structural reform agenda.”
The report forecast growth to be solid going forward, as investment expands thanks to recent laws designed to improve the business environment and the depreciated pound boosts exports.
Analysts expect GDP to expand 4.0% in FY 2018 and 4.4% in FY 2019.
Improved investor sentiment was evident by a surge in international reserves in July, and by the recent announcement of greater investment from neighbour Saudi Arabia.
Reforms to trim the onerous public deficit continue at pace, and the government tightened the
eligibility for food subsidies in August following electricity and fuel subsidy cuts earlier this year.
Egypt’s GDP increased 4.9% year-on-year in the April–June period (which is Q2 of calendar year 2017 and Q4 of Egypt’s 2017 fiscal year) according to the Ministry of Planning, up from the 4.3% expansion in the January–March period and higher than the 4.5% increase observed in the same quarter of the previous year.
As a result, GDP growth for the 2017 fiscal year came in at 4.1%, down slightly from 4.3% in FY 2016.
However, the report noted these measures have come at a social cost: Inflation rose in July to the highest level in decades, further eating into consumers’ purchasing power.
According to report, the external sector has seen a sharp reversal of fortunes since the start of the year, and the depreciation of the Egyptian pound fuelled strong export growth in the April–June period, as firms reaped the rewards of improved competitiveness.
At the same time, imports dropped sharply on the back of government efforts to improve the country’s external position, which included a hike in customs duties at the end of 2016.
According to the Ministry of Trade and Industry, the trade deficit plummeted 46% in H1, with the net contribution of the external sector to GDP growth improving as a result.