Renaissance Capital sees Egypt’s economy growing 4.5-5% in Q2

Egypt’s economy is expected to grow between 4.5 percent and 5 percent in the second quarter of 2021 and will continue to gather momentum throughout the rest of the year, according to economists at Renaissance Capital (RenCap).

Speaking at a press briefing on Tuesday, RenCap economists said the investment bank also maintained its projection for the Egyptian economy at 4.2 percent in 2021 and believes it would accelerate to 5 percent next year.

The RenCap economists attributed the anticipated growth to the recovering tourism, an uptick in portfolio inflows, economic recovery driving imports, continued easing of pandemic restrictions, and the vaccination programme.

In addition, the strong quarterly growth has also partly been due to the low base effect that saw the economy contract by 1.7 percent in the second quarter of 2020, said Yvonne Mhango, RenCap’s head of research in Africa.

Tourism will once again start making a positive contribution to growth in the second quarter of 2021, Mhango added.

In May 2021, Egypt’s airports saw 1.5 million passengers — a more than 20 percent year-on-year increase from the same month last year. However, tourist numbers in May 2021 are still a third below from pre-pandemic levels, which suggests the sector is still in recovery, Mhango noted.

Account Deficit

RenCap is forecasting Egypt’s current account deficit of around 4 percent of GDP for 2021, up from 2020’s 3.1 percent, said Mhango. Declining tourism revenues have been a driving factor in the current account deficit.

However, the anticipated recovery, and an uptick in imports, means the deficit will likely remain flat at 4 percent in 2022, the RenCap economist added.

“In spite of the current account deterioration, growth is returning to the economy, so we’re quite encouraged by that.” Mhango said.