Egypt’s GDP will expand 2.5% in the fiscal year (FY) 2019/20, a rise of 0.1 percentage points, and a rise on last month’s GDP forecast, according to economic forecaster FocusEconomics.
In its latest report, the company also projected that the country’s GDP will rise 3.7% in FY 2020/21. However, it added that Egypt’s economic growth will slow significantly in FY 2019/2020, as activity suffers due to containment measures imposed to curb the spread of the coronavirus (COVID-19) pandemic. Fiscal and monetary policy stimuli should, however, mitigate the headwinds.
The report revealed that Egypt’s economy expanded 5.6% year-on-year (y-o-y) in the second quarter (2Q) of FY 2019/20, or the period between October and December 2019. The Q2 figures remain unchanged from the growth rate announced in 1Q FY2020.
“Going forward, forecasts from both the government and FocusEconomics Consensus Forecast panellists point to a clear economic deterioration, most notably from March, when Egyptian authorities began imposing containment measures to reduce the spread of coronavirus,” FocusEconomics wrote.
The report also noted that April outturn highlights the effects of Egypt’s first full month with new social distancing measures in place, coupled with weaker demand from overseas. This comes as Egypt’s Purchasing Managers’ Index (PMI), which measures business activity in the non-oil private sector, fell to 29.7 in April, down from 44.2 in March, the lowest reading since the current survey began in April 2011.
FocusEconomics said that inflation accelerated to 5.9% in April, up from 5.1% in March, moving closer to the Central Bank of Egypt (CBE) target for 4Q of the current year (CY) 2020 target range of 6.0% to 12.0%.
“Going forward, inflation will remain contained due to weak demand and oil prices, although the Central Bank’s interest rate cuts should cause some upward pressure,” the report noted, adding, “Our panelists see inflation averaging 6.1% in CY 2020, which is down 0.1 percentage points from last month’s forecast, and 7.3% in CY 2021.”
On 2 April, the CBE left the overnight deposit rate at 9.25% following an emergency rate cut on 16 March in response to rising economic headwinds caused by the coronavirus crisis.
The report said that interest rates remain low going forward as the CBE aims to support economic growth and inflation, projecting the overnight deposit rate to end CY 2020 at 8.88%, and CY 2021 at 8.70%.
“Our panel sees the pound ending CY 2020 at EGP 16.53 per US dollar, and CY 2021 at EGP 16.77 per US dollar,” the report forecasts.