The Institute of International Finance (IIF) has downgraded its GDP growth forecast for Egypt to only 3.2% in 2020, due to the coronavirus (COVID-19) crisis, compared to 5.6% in 2019.
Minister of Planning Hala El-Said said previously that Egypt had reduced its GDP growth target in the current fiscal year (FY) 2019/20 to 5.1%. This marks a decline from the 5.6% GDP growth in FY 2018/19 due to the economic slowdown caused by the coronavirus outbreak.
She added that Egypt targets 4.5% growth in FY 2020/21, but it could go down to 3.5% if the coronavirus crisis continues until the middle of 2020.
In a recent report, the IIF projected the Middle East and Africa GDP growth to significantly decline to -2.3%.
The report expected emerging markets’ GDP growth to go down to -0.5% in 2020, compared to expectations of 4.2% in the IIF`s October 2019 report. The report also predicted a more pronounced economic contraction in emerging markets this year.
The coronavirus pandemic is having markedly worse economic effects than the global financial crisis (GFC) in 2008. The IIF has also significantly downgraded its global GDP growth forecast for 2020 to -2.8% from 2.6% in its October 2019 report.
The IIF said that the synchronised shock of the pandemic is responsible for the depth of this recession, as is the public health nature of the crisis.
“Our forecast assumes stabilisation and partial recovery in the second half (2H) of the year, a premise that is subject to downside risk. Under this assumption, capital flows will recover as well in 2H 2020. Nevertheless, flows will end the year substantially weaker than in 2019,” according to the IIF.
The institute forecasted China to grow by 2.1% this year, and developed economies to contract sharply. The IIF projected that the US will contract by 3.8%, Japan by 4.2%, and the European Union by 5.7%.
IIF projections showed some risk of further outflows in the second quarter (2Q) of 2020. The baseline scenario assumed non-resident portfolio flows will begin to recover in 2H 2020 as countries emerge from coronavirus-related shutdowns and benefit from accommodative monetary policy globally.
The collapse in equity flows is expected to be broad-based, with all regions, except Africa and the Middle East, experiencing sizable outflows. Debt flows in Latin America and European emerging Markets are likely also to be negative.