IMF raises projections for Egypt’s inflation through 2024 due to EGP devaluation

Doaa A.Moneim , Tuesday 25 Jul 2023

The International Monetary Fund (IMF) has raised its projections for Egypt’s inflation in 2023 and 2024 to 24.4 percent and 32 percent, respectively, up from 21.6 percent in 2023 and 18 percent in 2024 as projected in April, according to Deputy Director of the Research Department Petya Koeva Brooks.

IMF press briefing
Part of the IMF press briefing on its flagship World Economic Outlook (WEO) Report on Tuesday 25 July, 2023. Al-Ahram


Brooks made her comments in response to a question from Ahram Online about the IMF’s projections for the country’s real GDP growth and inflation, during a press briefing to launch the fund's update on its flagship World Economic Outlook (WEO) Report.

Brooks attributed these projections mainly to the depreciation of the Egyptian pound against the US dollar.

Applying a flexible regime for both exchange rate and interest rates is a key commitment of the Egyptian government under its four-year $3 billion loan deal with the IMF.

Since March 2022, Egypt has devaluated its local currency against the US dollar three times, lowering its value almost 50 percent against the greenback. 

Egypt’s annual headline inflation kept its upturn in June, reaching a new record of 36.8 percent, compared to 34.8 percent seen in May, according to the latest data published early July.

For the country’s real GDP growth, Brooks said that the IMF has maintained its April projections of 3.7 percent in 2023 and 4.1 percent in 2024.

“The Egyptian economy is slowing from 6.7 percent in 2022. The slowing growth is mostly because of the lack of foreign exchange flexibility and the shortages that have developed, which make a difficult for imports to happen and dumped the investment confidence,” Brooks explained.

Regional outlook

On a regional level, the IMF’s WEO report projected growth in the Middle East and Central Asia to decline from 5.4 percent in 2022 to 2.5 percent in 2023, with a downward revision of 0.4 percent since April. This is driven mainly by a steeper-than-expected growth slowdown in Saudi Arabia, from 8.7 percent in 2022 to 1.9 percent in 2023, a negative revision of 1.2 percent since April.

“The downgrade for Saudi Arabia for 2023 reflects oil production cuts announced in April and June in line with an agreement through OPEC+ (the Organization of the Petroleum Exporting Countries, including Russia and other non-OPEC oil exporters), whereas private investment, including from ‘gigaproject’ implementation, continues to support strong non-oil GDP growth,” WEO explained.

On a global level, the report projected global growth to drop from 3.5 percent in 2022 to three percent in both 2023 and 2024.

“While the forecast for 2023 is modestly higher than predicted in the April 2023 WEO, it remains weak by historical standards,” said the report.

It also added that the tightening policies the central banks applied globally in order to fight soaring inflation continues to weigh on economic activity.

Subsequently, the report projected the global headline inflation to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024.

Moreover, global core inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward, according to the report.

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