Egypt’s GDP will expand 3.2% in fiscal year (FY) 2020/21, 0.5 percentage points down from May forecasts, according to FocusEconomics panellists in their June “Consensus Forecast Middle East & North Africa” report.
The report added said that Egypt’s economy will enter FY 2020/2021, which will start in July, on a weak footing. This is due to the continued effects of coronavirus (COVID-19) containment measures both at home and abroad. However, fiscal and monetary policy stimuli should mitigate the headwinds, and Egypt is projected to see GDP growth of 5.5% in FY 2021/22.
Egypt’s total investment wil grow 5.3% in FY 2020/21, down 0.5 percentage points from last month’s forecast, and 9.7% in FY 2021/22.
The research institution said inflation will remain contained due to weak demand and lower oil prices, although the Central Bank of Egypt (CBE) interest rate cuts should cause some upward pressure.
“Our panellists see inflation averaging 5.7% in CY 2020, which is down 0.4 percentage points from last month’s forecast, and 7.2% in CY 2021,” the report said.
Inflation accelerated to 5.9% in April from 5.1% in March, moving closer to the CBE’s 4Q CY 2020 target range of 6.0% to 12.0%.
Focus Economics noted that at the monetary policy meeting on 14 May, the CBE left overnight deposit, overnight lending, and main operation rates unchanged at 9.25%, 10.25% and 9.75%, respectively.
“The next monetary policy meeting is scheduled for 25 June, and interest rates are seen remaining low going forward as the CBE aims to support economic growth and inflation,” FocusEconomics said.
It projects that the overnight deposit rate will end CY 2020 at 9.25% and CY 2021 at 8.94%
Regarding the exchange rate, the research institution sees the pound ending CY 2020 at EGP 16.43 per US dollar and CY 2021 at EGP 16.59 per US dollar.