The International Monetary Fund (IMF) raised its forecast for the growth of the Egyptian economy during the current fiscal year to 5.2%, up from 4.8%.
The IMF, in its world economic outlook report, maintained a 5.5% growth projected for Egypt in the coming fiscal year.
The IMF’s projections are consistent with government targets for the current fiscal year at 5.2%, but are less optimistic about the next fiscal year, for which the government targets 5.8% growth.
The report showed that the average inflation expectations could slightly increase in the current fiscal year to 20.1%, and 13% next year, compared to the 21% and 13.7% respectively stated in the second review forecast published in January.
The IMF also raised its expectations for the current account deficit to 4.4% this year and 3.9% next year, replacing its previous estimates at 4.5% and 4%.
Meanwhile, the report predicted an improvement in the unemployment rate this year, projecting 11.1% on average this year and 9.7% next year, compared to 11.2% and 9.9% in the previous report during the second review for the economic reform programme.
According to the financial statement for the next fiscal year budget, issued days ago by the Ministry of Finance, the government expects the average unemployment rate to reach 10.8% in the current fiscal year and 10-11% in the coming year.
Over the last 15 months, Egypt has been implementing an economic reform programme in cooperation with the IMF. This programme included the floatation of the national currency, slashing energy subsidies, reforming the taxation system, and, in return, lending Egypt $12bn over three years. Egypt has since obtained half the loan.
The IMF mission is due to visit Cairo next month for the third review of the economic reform programme, under which Egypt will receive a tranche of about $2bn.
The World Bank (WB), in a Monday statement, expected that the budget deficit will narrow to 9.8% of GDP in FY 2017/18, adding, “this is slightly higher than initially-budgeted, due to larger interest payments, higher international oil prices, and larger-than-budgeted exchange rates.”
The WB said that the fiscal consolidation programme is expected to rely on revenue mobilisation, in particular on the increase in VAT receipts, in addition to energy subsidy reforms.
“The current account deficit is expected to narrow to 4.9% of GDP in FY 2017/18, from 6.6% of GDP in FY 2016/17,” the statement added.
The WB noted that improvements in oil-importing countries is also expected to be driven by a sharp rebound in Egypt. Stabilisation policies, reforms, and a surge in foreign receipts are expected to lower fiscal and external imbalances in 2018 and beyond.
“In the short term, the outlook for MENA remains positive, and the growth rebound is expected to hold firm over the next two years, reaching 3.3% in 2019 and 3.2% in 2020,” said the WB.
Egypt is number one in terms of GDP growth in the Middle East compared to the GCC countries, as the growth rate of the Egyptian pound ranges between 1% and 2%, according to Oumnia Boualam, country director at Oxford Business Group.
Boualam said that Egypt is the centre of growth as the country is more competitive and attractive for more investments.
The year 2017 was the best year for many companies in the sectors of infrastructure, real estate, and banking, Boualam said, explaining that the year witnessed an infrastructure boom in building materials and suppliers as well as other sectors.
“I expect more growth in GDP, as Egypt, at the beginning of 2017, was expected to achieve 4.5% GDP growth but by the end of the year, the country had achieved over 5% GDP growth, which clearly shows that the foreign direct investments (FDIs) have increased. Furthermore, if you look at particular sectors you will see a lot of FDIs in the industry sector, especially multinational companies looking for investment in Egypt,” Boualam.
Boualam noted that in the first quarter of 2017, the Egyptian people were still absorbing the shock of liberalising the exchange rate. However, people became more confident and companies made more investments in the last six months of 2017.