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Investments to reach 8.3% of GDP in FY 2018: FocusEconomics - Daily News Egypt

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Investments to reach 8.3% of GDP in FY 2018: FocusEconomics

FocusEconomics expects inflation to average 15% in 2018

FocusEconomics panellists expect total investment in Egypt to reach 8.3% of GDP in fiscal year (FY) 2018, which is down 0.3% from FY 2017, and expect it to grow to 8.5% in FY 2019.

FocusEconomics Consensus Forecast panellists expect the economy to grow 4.5% in FY 2018, and 4.9% in FY 2019.

The report said that growth should accelerate in FY 2018. Investment will likely rise sharply, boosted by stronger business sentiment and an improved regulatory environment, while the external sector will benefit from the weaker pound.

However, the elevated debt burden could become a pressing concern if reform momentum flows.

“Headline inflation dropped sharply from 26.0% in November to 21.9% in December, on the back of tighter monetary conditions and a favourable base effect. Our panellists expect inflation to decline going forward, averaging 15.0% in calendar year (CY) 2018 and 11.5% in CY 2019, as the impact of the government’s reform measures lessens,” the report read. “The economy is slowly turning a corner. In January, international reserves rose for the 15th straight month, while the Purchasing Managers’ Index (PMI) reading suggested business conditions largely stabilised, thanks in part to greater new export orders.

In addition, the primary budget deficit for July-December fell to a multi-year low, due to tight wage bill control and higher tax revenue. The improved macroeconomic position led Fitch Ratings to recently revise its outlook to positive.”

The government is pushing ahead with reforms: On 28 January, parliament passed Egypt’s first bankruptcy law, to simplify the bankruptcy procedure and entice foreign investment. However, the country still faces myriad challenges, and the International Monetary Fund recently urged the government to boost the private sector and strengthen the labour market.

The report noted that in December, urban consumer prices fell from the previous month for the first time in two years, dropping 0.21% and contrasting November’s 0.97% uptick. The decline was driven by lower prices for food and non-alcoholic beverages.

In a similar vein to declining headline inflation, core inflation also dropped sharply, moving back below 20%. The figures were aided by a favourable base effect. Lower inflation will be welcomed by consumers, and could open the door to monetary easing in the coming months.

Meanwhile, annual average inflation fell from 29.8% in November to 22.3% in December. Inflation should gradually decline as the impact of the government’s reform measures lessens.

FocusEconomics Consensus Forecast participants expect inflation to average 15.0% in calendar year 2018. In calendar year 2019, inflation is forecast to fall to 11.5%.

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