Egypt’s GDP growth will reach 3% in fiscal year (FY) 2019/2020 ending this month, according to the World Bank’s June 2020 Global Economic Prospects report.
The World Bank’s latest projections for Egypt are down on the 5.9% it had announced in January.
The report said that Egypt’s growth in FY 2019-2020 will be buoyed by “generally supportive activity” before the onset of the pandemic, the latter of which has since disrupted the growth.
The economy will expand at a slower pace of 2.1% in FY2020-2021, which the World Bank had previously forecast at 6%.
“Generally supportive activity in Egypt before late FY 2019/2020, ending in June, has been disrupted by the pandemic, while other smaller oil importers grapple with additional shocks to growth,” the report read, “Firms in smaller oil importers are also expected to suffer from anaemic demand and global disruptions, given some reliance on foreign sourced inputs.”
It added that medium-term growth prospects for the Middle East and North Africa (MENA) region are contingent upon no amplification of regional conflicts or their spill-overs.
Continued structural programmes in many economies, for example Egypt’s private sector development and the GCC’s diversification programmes, are expected to encourage growth-enhancing structural reforms.
Reforms in the financial sector are also expected to continue to strengthen the region’s investment climate. However, success is contingent upon a sustained commitment to reforms, including by newly-formed governments.
Moderating inflation has allowed monetary policy space for large economies like Egypt to aggressively cut policy rates in response to the pandemic, the World Bank said.
It added, “Egypt has further cut policy rates in response to coronavirus (COVID-19) concerns amid moderating inflation. The spill-overs of the recent global financial turbulence have also reached the MENA region.”
Egypt and Djibouti are the only two MENA countries whose economies will not contract this fiscal year, with Egypt’s forecast growth more than double Djibouti’s, which stands at 1.3%.
The report highlighted that MENA region output is expected to contract by more than 4% in 2020, in the face of the coronavirus pandemic and the plunge in oil prices associated with collapsing global demand.
Non-oil activity is decelerating in large GCC economies as pandemic concerns amplify.
In May, Minister of Planning and Economic Development Hala El-Said noted that Egypt’s real economic growth would hit 5% during the third quarter (Q3) of FY 2019/2020. She added that pre-pandemic real economic growth was anticipated to reach 5.9%.