Most international institutions have praised Egypt’s economy and the steps taken by the government to confront the novel coronavirus (COVID-19), according to Minister of Planning and Economic Development Hala El-Said.
El-Said’s remarks came as her ministry issued a report on the views of international institutions regarding Egypt’s economic situation during the pandemic.
The minister added that international institutions expect an improvement in Egypt’s economic indicators in the coming period.
She pointed to the Capital Economics report which anticipates pressures on the Egyptian pound to ease, after the country overcomes the demands created by its balance of payments.
This is likely to occur as tourism, one of Egypt’s most important generators of finance and foreign exchange, is heading towards recovery with the removal of restrictions related to the pandemic.
According to the ministry report, Capital Economics explained that the Egyptian pound has witnessed a 2% appreciation against the US dollar since July. At the same time, the Central Bank of Egypt (CBE) has kept interest rates unchanged to encourage the flow of capital.
The report expects an improvement in the local currency’s performance against the US dollar in the next few years, compared to its pre-coronavirus levels in 2019, when the US dollar exchange rate reached EGP 16.82.
The report also said that it expects the Egyptian pound’s performance to appreciate by 4.5%, to EGP 16.06 against the US dollar in 2020, before falling slightly, by 4.3%, to EGP 16.10 in 2021. The local currency is then expected to improve by 5.1% to EGP 15.97 in 2022, rising again by 5.8% to reach EGP 15.85 in 2023, before reporting a rise of 6.4% to EGP 15.74 in 2024.
The ministry report also mentioned that The Economist has praised Egypt’s stable net international reserves in June 2020, which led to an improvement in the local currency’s performance against the US dollar.
At the same time, The Economist further expects that the country’s tourism, export and services sectors will gradually recover after 2021. It indicates that restored confidence in the availability of hard currency will contribute towards attracting foreign investors, especially from 2022.
El-Said also drew attention to Fitch’s expectations of Egypt’s success in increasing foreign exchange reserves in the coming years. Fitch noted that this would be sufficient to cover imports for at least six months until 2024, with the total value of goods and services exports to reach $47.7bn in 2020. The agency noted that this will continue to rise to $55.3bn in 2024.
The Ministry of Planning and Economic Development noted that Fitch viewed the Egyptian pound as among the best performing emerging market currencies until August 2020.
The agency confirmed that the Egyptian pound witnessed stability against the US dollar, and is expected to remain relatively stable until the end of 2020. This will occur despite the projected sharp decline in emerging market currencies on the back of the global pandemic.
The International Monetary Fund (IMF) expects an improvement in international reserves and foreign exchange sources. It projects that the total international reserves will reach $40.1bn in fiscal year (FY) 2020/21, rising to $51bn in FY 2024/25.
The IMF also announced its expectations that net foreign direct investment (FDI) will reach $5.5bn during FY 2020/21, and $17.1bn during FY 2024/25.