Egypt’s economy will grow 4.2 percent in the fiscal year that began in July, well below government projections of 5.3-5.5 percent, economists said in a Reuters poll published on Tuesday.
The economy has struggled since the 2011 uprising against Hosni Mubarak drove tourists and foreign investors away, but sweeping reforms as part of an International Monetary Fund loan agreed last year are expected to boost growth.
The poll of 12 economists put growth at 4.2 percent for the 2017/18 fiscal year and 4.5 percent for the following year. Growth was seen rising 4.6 percent in the 2019/20 fiscal year.
“Economic growth prospects have improved as reform efforts bear fruit. The main drivers include strong growth in real exports as competitiveness improves, and continued investment in Egypt,” said Nadene Johnson, an economist at NKC African Economics.
Egypt’s planning minister said earlier this month she expected the economy to grow by up to 5.3-5.5 percent this year. She put growth at 6 percent for the following fiscal year.
The latest Reuters consensus for urban consumer inflation was 25.4 percent for the current fiscal year, up from a previous forecast of 23.3 percent. Economists polled expected the rate to drop to 15.8 percent in the 2018/19 fiscal year and 12.6 percent the year after.
Egypt’s annual inflation rates dropped in December to their lowest levels since the country floated its pound currency in November 2016, after which prices shot up.
Annual urban consumer price inflation eased to 21.9 percent in December from 26 percent in November and core inflation, which strips out volatile items such as food, fell to 19.86 percent in December from 25.54 percent the previous month.
Egypt’s central bank has raised key interest rates by 700 basis points since the flotation of the pound to battle soaring inflation. Economists see it cutting rates as soon as next month.
“We think that the MPC (monetary policy committee) will embark on an easing cycle when it next meets in mid-February,” said Jason Tuvey, Middle East economist at London-based Capital Economics.
“We expect inflation to fall close to single digits by the end of this year, which should pave the way for interest rates to be cut further to 13.75 percent,” Tuvey said. He expected rates to fall by 100 basis points in February.
Since the flotation, Egypt has removed limits on foreign currency transfers, lifted hard currency restrictions for importers, cut subsidies for domestic fuel and raised value-added tax.
The reforms have helped Egypt attract foreign investors after years of political turmoil.
Foreign holdings of Treasury bills hit a record high in December, foreign inflows into the stock market last year were the highest since 2010 and direct investment by foreign firms and private equity funds is on the rise again.