Moody’s estimates Egypt’s economic growth to slow below 3% in FY2020/21

Moody’s said on Monday it estimates Egypt’s economic growth to slow below 3 percent in the financial year 2020/2021, that ends in June 2021, taking into account the government’s coronavirus response package of 2 percentage points of GDP.

However, it said in a statement that the outbreak of the coronavirus pandemic will delay, but not derail the government’s fiscal consolidation efforts, keeping the debt/GDP ratio on a downward trajectory over the medium term.

“Taking into account the government’s pandemic response package of about 2 percentage points (pp) of GDP and weaker revenue as growth slows below 3 percent in fiscal 2021 (the year ending in June 2021), Moody’s estimates the general government fiscal deficit to reach 7.9 percent and 8.5 percent of GDP this and next fiscal year respectively, bringing a gradual narrowing of the deficits in recent years to a temporary halt.”

Moody’s said it also expects the primary balance to remain in surplus in both years, although to a smaller degree than previously anticipated.

“The government’s budget position will continue to benefit from the completion of energy subsidy reform in July 2019 and the broadening of the revenue base (e.g. VAT introduction) achieved in recent years.”

Moody’s: Egypt’s government debt/GDP ratio to peak in FY21

Allowing for additional off-budget spending of about 4pp of GDP in financial year 2020, Moody’s said it anticipates “the general government debt/GDP ratio to peak at about 85 percent” of GDP in financial year 2021 before resuming its established declining trend thereafter.