AfDB says Egypt’s economy to grow 5.8% in 2020, 6% in 2021

Egypt’s economy is forecast to strengthen to 5.8 percent in 2020 and to 6 percent in 2021, the African Development Bank (AfDB) said on Monday.

In its latest African Economic Outlook 2020, AfDB attributed its growth forecast to the broad-based economic reform measures adopted by Egypt since 2016.

“Other factors supporting growth include the recalibration of government’s social inclusion programmes away from general subsidies on energy products to targeted transfers and improvements in the business environment.” AfDB report read.

The report – which included 54 countries – also referred to tourism, construction, and oil and gas sectors as driving Egypt’s growth. On the demand side, consumption remained subdued as exports and investments were more robust, it added.

Under a wide-scale plan to boost the economy, Egyptian government imposed added-value tax in addition to gradual decline of energy subsidies. This has led to shaving off financial deficit from 12.5 percent of Gross Domestic Product in 2016 to 8.7 percent in 2019, the bank said.

“The improving business environment should boost domestic investment and further attract foreign direct investment.”

AfDB also forecast that decline in Egypt’s inflation is expected to continue.

“The decline in inflation is expected to continue. As a result, monetary policy is becoming less restrictive. Cuts in central bank rates would also ease the repayment burden of the government’s large short-term debt.”

Debt growth has been contained as the debt-to-GDP ratio fell from 103 percent in 2017 to 89.5 percent in 2019, partly a result of fast-growing nominal GDP. The current account deficit narrowed to 2.3 percent in 2019, and foreign exchange reserves reached an all-time high at $44.96 billion in August 2019. Inflation pressures are also easing, standing at 8.7 percent year-on-year in July 2019, the lowest in the past four years.