Fitch Solutions has slightly downgraded its economic growth outlook for Egypt to 3.2 percent in 2021, down from 3.3 percent projected in November, expecting the country to achieve four percent economic growth over the next three years.
In its monthly outlook insights on the Middle East and North Africa (MENA) region economy, shared with Ahram Online, Fitch Solutions expects that Egypt’s interest rate will stand at 9.75 percent until end of 2021, projecting that inflation will hit six percent in 2021, slightly above Fitch's projection in November of 5.9 percent.
It also expected that US dollar will be traded at EGP 16.20 until the end of 2021.
Addressing the election of Joe Biden as US president, Fitch Solutions said in its insights that Biden will likely reverse some of Donald Trump’s policies towards the MENA region, aligning more closely with traditional Democratic Party policy positions.
This expectation is underpinned by Biden’s track record as vice president to Barack Obama (2009-2017), and that many of his foreign policy staff previously worked under both Obama and Bill Clinton (1993-2001).
Fitch Solutions expects the global and regional context to be different in 2021 compared to the Obama era, and that Biden will have to adjust his policy positions accordingly.
It added that the key challenge that Biden will face is dealing with growing perceptions of US disengagement from the MENA region, as Washington seeks to contain its military presence in the region while also maintaining strong partnerships and strategic influence.
Concerning US policy towards Arab countries, Fitch Solutions said that Biden will likely introduce more conditionality to US partnerships with Arab countries, expecting a greater focus on responding to reports of human rights violations under Biden than under Trump.
“This could, for example, translate into delays or rejections of certain weapons sales, notably to Saudi Arabia or other GCC states. Egypt will also be at greater risk of seeing cuts to US military aid,” according to Fitch Solutions.
Fitch also noted that as a result of this and Biden’s overtures to Iran, relations between the US and many Arab states will likely cool, expecting that Biden will stop short of actions that could seriously jeopardise the US’s most important alliances in the region.
“Strong ties to countries such as KSA (the Kingdom of Saudi Arabia), the UAE and Egypt are still vital to serving strategic US goals. That said, Biden’s reluctance to engage militarily in the region will likely stoke fears of eventual US disengagement from MENA among Arab states,” according to Fitch.