The Institute of International Finance (IIF) projects Egypt’s growth now stands at 2.7%, down from their previous 2020 forecast of 5.4%. The IFF also downgrades its MENA growth forecast to -0.3% from their original 2020 forecast of 1.8% growth.
The latest figures follow the twin shocks of the COVID-19 and plunging oil prices, with additional downside risks likely.
“MENA’s current account is set to shift from a surplus of $28bn in 2019 to a deficit of $92bn in 2020, with the fiscal deficit widening from 3.7% of GDP in 2019 to 8.8% in 2020,” the report said.
The IIF expects that a global recession will lead to a reduction in trade, foreign direct investment (FDI), tourism flows, and remittances to Egypt, Jordan, Morocco, and Lebanon. The institute added that Egypt also expects a significant drop in Suez Canal transit revenue.
Based on the IIF`s baseline average oil price scenario of $40/barrel, the nine MENA oil exporters may see a fall in their 2020 hydrocarbon earnings, of $192bn (11% of GDP). Consequently, the cumulative current account balance would shift from a surplus of $ 65bn in 2019 to a deficit of $ 67bn in 2020. There would also be a fiscal deficit, widening from 2.9% of GDP to 9.1%.
The IIF expects the growth in MENA oil importers to decline by 2.4% to 0.8% in 2020, the lowest since the early 1990s.
The IIF also downgraded non-oil growth in Saudi Arabia from 3% to 0.8%, and deepened the recessions in Algeria, Iraq, and Iran. It also assumes modest increases in oil production in Saudi Arabia, the UAE, and Kuwait, leading to higher headline growth.
The IIF added that the service sector will receive the hardest hit as a result of containment efforts and social distancing. The IIF mentioned that all exporters are likely to record large fiscal deficits due to the collapse in oil revenue, leading to a rise in public debt.