Egypt sees highest real GDP growth in Middle East in 2020-2024: Fitch

Egypt is projected to see the highest real GDP growth in the Middle East and North Africa region throughout 2020-2024, set to reach 4 percent, according to Fitch Solutions.

In its monthly economic update insights on the Middle East region released on Sunday, Fitch said Egypt’s economic growth is expected to record 3.3 percent in the current financial year 2020/2021, down from 3.5 percent in financial year 2019/2020.

Fitch projected Egypt’s inflation rate to reach 5.9 percent, while it projected the Central Bank of Egypt to keep the current interest rates at 9.75 percent until the end of 2020.

It also expected the US dollar to be traded at 16.25 Egyptian pounds until the end of 2020.

According to Fitch insights, the purchasing managers’ index and Google mobility data point to widespread disruption to local activity in the second quarter of the financial year 2020/2021, which ends in December, though conditions are now easing.

Fitch pointed out that weak prospects for tourism, investments, and remittance inflows will continue to dampen Egypt’s growth performance as well. However, the International Monetary Fund (IMF) funding and eurobond issuance will support the country’s external position, though risks of renewed volatility persist, it added.

In 2020-2024, Fitch projected Egypt’s budget balance to GDP ratio to record close to -10 percent, with current account balance to GDP ratio seeing negative growth by about -2.5 percent.

For the Middle East, Fitch expected the region’s real GDP growth to grow to 3.5 percent in 2021, following a contraction of 5.1 percent in 2020. Meanwhile, the outlook for oil producers, except Iran, appears sluggish as only moderate oil price increases are likely to result in limited oil output growth and continued fiscal restraint, it added.

Elsewhere in the region, Fitch estimated that limited policy flexibility and socio-political instability are weighing on prospects for a post-COVID-19 recovery.

Fitch also said that Iran accounts for a large share of the gains projected for 2021 in the light of Joe Biden’s win in the latest U.S. election which is expected to result in sanctions relief for the Islamic Republic.