Members of The African Development Bank and state heads pose for an image ahead of their annual meeting. Photo courtesy of Flicker
The report was published as the AfDB’s 57th annual meetings are currently held in Accra under the theme ‘Achieving Climate Resilience and a Just Energy Transition for Africa.’
The bank also raised its estimations for Egypt’s real GDP growth in 2021 to 3.3 percent, up from 3.2 percent projected a year earlier.
“Because Egypt has shown resilience to the crisis since 2020, its economic outlook is favorable with the government’s commitment to implementing the second phase of structural reforms, announced in May 2021,” the report explained.
The report said that due to rising global food prices, inflation is projected to rise to 7.1 percent in current FY2021/22 and 7.3 percent in FY2022/23, fueled mainly by the Russia-Ukraine conflict.
On the other hand, Egypt’s fiscal deficit is projected to decline to 6 percent of GDP in FY2021/22 and in FY2022/23, driven by the authorities’ commitment to returning to the pre-crisis primary surplus of 2 percent of GDP, according to the report.
Egypt’s government aims raise the primary surplus to 2 percent of GDP to reach EGP 132 billion and reduce the budget deficit to 6.1 percent of GDP in FY2022/23.
In FY2021/22, the primary surplus posted 1.4 percent of GDP, which helped reduce the budget deficit to 7.4 percent of GDP, according to the finance ministry.
Meanwhile, the report expects the country’s current account deficit to remain around 4.5 percent and 4.7 percent of GDP in FY2021/22 and in FY2022/23 respectively with the expected energy and food commodities price hikes.
“Egypt should mobilise the necessary resources to protect vulnerable populations’ purchasing power and improve targeting of social protection programs. Further, Egypt should accelerate reforms to catalyse private development,” the report urged.
As the annual meetings this year focus on climate adaptation efforts in Africa, the report noted that Egypt is highly vulnerable to climate change.
“[Egypt] is 120 on the 2021 Global Climate Risk Index (GCRI), but over the past few years has reduced its per capita CO2 emissions. Its most sensitive sectors are water and agriculture,” according to the report.
In this respect, the report said that improving water resource management is essential for the country as agriculture is a key sector that provides livelihoods for 55 percent of the population and employs 23.3 percent of the labour force.
On the continental level, the report asserted the high uncertainty of Africa’s growth outlook fuelled by the ongoing global economic challenges severely affecting the continent.
“The spillover effects from the Russia-Ukraine conflict and related sanctions on Russia may cause a larger decline in global output than currently projected. A combination of low COVID-19 vaccination rollout and emergence of new COVID-19 variants may force countries to retain some restrictions,” the report illustrated.
“Other downside factors include heightened debt vulnerabilities, tight global financial conditions as inflationary pressures rise, the effect of the Russia-Ukraine conflict and related sanctions on Russia, climate and environmental risks, and other socio-political and security issues. Upside factors include faster vaccination rollout, a comprehensive resolution of debt problems, and policies to accelerate structural transformation and build economic resilience.”