The Egyptian economy is set to grow 2.8 percent in the financial year 2020-2021 that ends in June, a Reuters poll of 20 economists showed on Tuesday, slower than the 3.3 percent forecast three months earlier.
The economists attributed the downgrade to the downturn in the tourism industry, which was also the key factor for muted growth economists cited in the October poll.
HC Securities’ Monette Doss points to expectations of “weak tourism receipts” through the rest of the financial year as being “the main drag on the economy.” Some 3.7 million tourists visited Egypt in 2020 — a 75 percent year-on-year fall from a record 13 million in 2019.
The coronavirus pandemic caused tourism to collapse and other parts of the economy to slow.
October’s consensus forecast was already significantly lower than the almost 6 percent growth projected before the outbreak of coronavirus pandemic. In November, the government said it expected growth of 3.3 percent this financial year.
The International Monetary Fund (IMF) this month forecasted growth of 2.8 percent.
A rebound in growth over the next two financial years is still in the cards, the economists expect, albeit at a slightly lower rate in financial year 2022-2023 than they previously forecasted. The Egyptian economy is still on track to grow 5 percent in financial year 2021-2022, and will expand at a 5.4 percent clip the following financial year — down from the most recent forecast of 5.5 percent.
Private sector investment will drive the economic growth, spurred on by lower rates and higher public spending, according to Doss.
“We expect local private investments encouraged by monetary easing together with planned government spending to support economic growth,” Doss said.
The economists also expected that the Egyptian central bank’s overnight lending rate will be cut 100 bps to sit at 8.25 percent by the end of June 2021, remaining steady until June 2023, when the central bank could increase rates by 25 bps to 8.50 percent.
Egypt’s inflation rate is still expected to decelerate in the financial year 2021-2022 before rising over the next two years. According to the economists, the annual urban consumer price inflation is expected to come in at 5.6 percent, two percentage points weaker than the last time around. However, they have held firm on their expectation that inflation will come in at 7 percent in financial year 2022-2023 and financial year 2023-2024.
The Egyptian pound is seen sliding less than before, according to the economists. The currency is expected to hover at 16.11 pounds to the greenback by December 2021, from its current 15.67 pounds, rather than 16.50 pounds as in the previous poll.
For 2022, economists see the Egyptian currency weakening further to 16.63 pounds, yet this is also a more upbeat forecast than the previous poll.