Egypt’s economy projected to grow steadily over the next three years

The pyramids at Giza, one of Egypt's most popular tourist destinations. /Xinhua
Various denominations of Egyptian currency. /Shuttershock Images

Egypt’s economy will grow fairly steadily over the coming three years, with inflation gradually declining from double digits and the pound weakening in the near-term, a Reuters poll showed.

Gross domestic product (GDP) is forecast to expand a median 5.5 percent in the fiscal year that began this month, according to a Reuters poll of 19 economists taken July 6-20, up slightly from 5.2 percent predicted three months ago.

The government is aiming for the same rate of 5.5 percent, state news agency MENA reported earlier this month. The economy grew 6.2 percent in the 2021/22 fiscal year that ended in June, the planning minister said earlier this month.

Economic growth is expected to ease to 4.9 percent in the following 2023/24 fiscal year and quicken again to 5.4 percent in 2024/25.

After emerging from the worst of the coronavirus slowdown, Egypt’s economy was dealt a new shock by the knock-on effects of what’s going on in Ukraine, as investors pulled billions of dollars out of its treasury market.

Egypt is one of the world’s top wheat importers and has suffered from rising oil and grain prices. It imported most of its wheat from Russia and Ukraine, two countries that also supplied a large number of tourists.

The country is one of a cluster that have sought fresh support from the International Monetary Fund.

Prices of key global commodity prices – in particular, wheat, fertilizer and oil – are now cooling, leading to slightly higher growth projections, said Allen Sandeep of Naeem Brokerage.

“I have a feeling all of that indirectly would provide some relief for emerging economies that are import dependent,” he said.

Inflation, at its highest in three years but down slightly to 13.2 percent in June, will remain in double digits as long as the Russia-Ukraine crisis and sanctions against Russia continued, Sandeep said.

Survey respondents expected inflation would be lower over the next two years, slowing to an average of 10.0 percent in the current fiscal year, followed by 10.4 percent next year.

Poll respondents saw inflation falling back to a median of 8.0 percent in the 2024/25 fiscal year, within the central bank’s target range of 5-9 percent

They expected Egypt’s currency to be trading at 19.00 to the dollar by the end of the current fiscal year, in June 2023, weakening to 19.86 by June 2024 and 20.00 by June 2025, down more than 25 percent from levels at the start of this year.

On March 21, Egypt’s central bank allowed the currency to weaken to about 18.45 to the dollar from its previous level of 15.70. On Wednesday, the pound traded at about 18.94 pounds to the dollar.

The central bank is expected to keep the overnight lending rate unchanged at 12.25 percent by the end of the current fiscal year, lowering it to 11.75 percent and 10.50 percent by the end of the subsequent 2023/24 and 2024/25 fiscal years, the poll showed.