Egypt’s total investment is to grow 11.5% in fiscal year (FY) 2020, which is up 0.7 percentage points from last month’s forecast, and 9.7% in FY 2021, according to FocusEconomics’ expectations.
FocusEconomics said in its report ‘Consensus Forecast Middle East and North Africa September’ 2019 that the 2020 FY, which started in July, began on a positive note. The non-oil private sector Purchasing Managers’ Indexes (PMI) crossed into expansionary territory in July for the first time in three months, boosted by an increase in output, which was itself buoyed by increased new orders from abroad.
Meanwhile, the fiscal deficit as a percentage of the GDP dropped by over one percentage-point in the first 11 months of FY 2019.
FocusEconomics panellists expect a GDP growth of 5.5% in FY 2020, which is unchanged from last month’s forecast. For FY 2021, panellists forecast economic growth of 5.4%.
The report noted that inflation tumbled to 8.7% in July from 9.4% in June, despite government fuel subsidy cuts in the same month. Inflation thus fell below the 9.0% midpoint of the Central Bank’s fourth quarter (Q4) calendar year (CY) 2020 target range of 6.0%–12.0%.
“Going forward, inflation should hold fairly steady, with upward pressure coming from still-strong economic growth. Our panellists expect inflation to average 11.7% in CY 2019, which is down 0.4 percentage points from last month’s forecast, and 9.7% in CY 2020,” the report read.
On 30 August, the Egyptian pound traded at EGP 16.53 per USD, a 0.2% appreciation from the same day a month earlier. After a long run of gains, the pound is seen depreciating going forward, partly on expectations that the Central Bank of Egypt (CBE) will continue monetary policy easing.
FocusEconomics sees the pound ending CY 2019 at EGP 17.26 per USD and CY 2020 at EGP 17.82 per USD.
In terms of prices, input cost inflation accelerated to the quickest pace in nine months, primarily due to government fuel subsidy cuts, while output prices increased. Inflation decelerated to 8.7% in July from 9.4% in June, dipping below the 9.0% midpoint of the Central Bank’s Q4 CY 2020 target range of 6.0% to 12.0%.
FocusEconomics Consensus Forecast participants expect inflation to average 11.7% in CY 2019, which is down 0.4 percentage points from last month’s estimate. In CY 2020, inflation is forecast to slow to 9.7%.
“Most of our panellists see interest rates continuing on a downward trend in the short-term. The next monetary policy meeting is set for 26 September. FocusEconomics Consensus Forecast panellists expect the overnight deposit rate to end CY 2019 at 13.33% and CY 2020 at 11.60%,” the report noted.
Regarding Egypt’s public debt, the report anticipated that the public debt is expected to reach 58.9% of the GDP in FY 2020, compared to 89.1% of the GDP in FY 2019. Meanwhile, the external debt is projected to record 33% of the GDP in FY 2020, compared to 35.1% of the GDP in FY 2019.