Egypt’s economy may rebound to 6.5% in 2021- new IMF forecast shows

EGYPT – The International Monetary Fund (IMF) has released a new forecast for Egypt’s economy projecting that the economy may rebound to a peak of 6.5% in 2021/2022 despite being expected to fall to a low of 2% this year due to COVID-19 pandemic.

IMF clarified that this percentage came as the global recovery is now expected to be more gradual and domestic activity is projected to remain weak for longer.

 “The COVID-19 outbreak is driving a downward revision to Egypt’s growth by the IMF from 5.5 percent to 2 percent in FY2019/20, and from 5.2 to 2 percent in FY2020/21,” IMF said.

The Fund noted that the downward projection for 2020/2021 was to reflect the sharp slowdown in tourism and supporting industries as well as manufacturing, real estate and trade, despite construction, oil refinery, and agriculture remaining fairly robust.

As for the 2021/2022 financial year, IMF expected real gross domestic product (GDP) to hit 6.5 percent and to record 5.3% in both 2022/2023 and 2023/2024.

The report explained that assuming macroeconomic stability will be maintained, a strong rebound of 6.5 percent is expected in FY2021/22 as domestic activity starts to normalize.

IMF reported that inflationary pressures are expected to remain contained with annual headline inflation increasing from just under 6 percent on average in FY2019/20 to about 8.2 percent in FY2020/21.

IMF also noted that progress on structural reforms is essential to unlock Egypt’s higher growth potential.

“The structural reforms to enhance [state-owned enterprises] SOE transparency, improve competition, and facilitate trade are critical for incentivizing private sector participation and will help strengthen governance and reduce corruption vulnerabilities,” IMF said.

It added that these efforts, when complemented by reforms to strengthen the social safety nets, will contribute to promote human capital and business investments and raise overall productivity.

Earlier, IMF approved a 12-month Stand-by Arrangement for Egypt, with access equivalent to about $5.2 billion by the end of June.

This new arrangement aims to help Egypt cope with challenges posed by the COVID-19 pandemic by providing Fund resources to meet Egypt’s balance of payments needs and to finance the budget deficit.

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