The country’s GDP growth reached 3.8 percent in 2023 and 6.6 percent in 2022, noted the report, which was titled ‘Conflict and Debt in the Middle East and North Africa’.
In January, the World Bank downgraded its forecasts for the country’s real GDP growth for 2024 to 3.5 percent from 3.7 percent in a previous estimate.
Egypt’s current account balance, which is the sum of net income from abroad, net current transfers, and trade balance, is projected to shrink to 3.2 percent in the current FY2023/2024 and to 3.3 percent in the FY2024/2025.
The account balance recorded 1.2 percent in 2023, according to the report.
The report also expects the country’s fiscal balance deficit to grow to 6.5 percent in FY2023/2024 and 6.4 percent in FY2024/2025, compared to six percent attained in 2023.
The fiscal balance is the amount of money the government receives from tax revenues and the proceeds of assets sold excluding the government’s spending.
The average fiscal deficit in MENA oil-importing economies, which include Egypt, will slightly widen to 5.7 percent of GDP in 2024, up from 5.5 percent in 2023, according to the report.
The report attributed this deterioration to the rise in Egypt’s fiscal deficit in 2024 as tax revenue shrinks from a slowing economy while interest payments rise because of a devalued currency and monetary tightening.
On 6 March, the Central Bank of Egypt hiked the key interest rates by six percent and floated the local currency, letting it be set according to the supply and demand forces in the local market.
As a result, the Egyptian pound has lost over 60 percent of its value against the US dollar since then.
The regional situation
Regionally, the report projects the real GDP growth of the Middle East and North Africa (MENA) to grow at 2.7 percent in 2024 and 4.2 percent in 2025, in a return to the low growth that prevailed in the decade before the global pandemic.
In 2025, the MENA region is expected to grow at 4.2 percent, according to the report.
In the Gulf economies (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE), growth will improve to 2.8 percent in 2024 and 4.7 percent in 2025.
“The pickup in growth is mainly driven by higher oil output due to the phasing out of oil production cuts and robust growth in the non-oil sector linked to diversification efforts and reforms,” the report explains.
As per the report, growth in developing oil importers, including Egypt, is forecasted to decline to 2.5 percent in 2024, down from 3.1 percent posted in 2023.
“The difference between forecasted growth for the GCC economies and developing oil importers, excluding Egypt (Djibouti, Jordan, Lebanon, Morocco, Tunisia, West Bank and Gaza) is almost a percentage point. This is in stark contrast to 2022 where the difference between these two country groups was 5.6 percentage points," the report elaborated.
The report also expected the current account deficit of MENA’s oil importer countries, which include Egypt, to increase to 3.4 percent of GDP in 2024, up from 1.8 percent in 2023.
“This deterioration reflects worsening current accounts in four out of the six countries in the group. Notably, Jordan will continue to run a sizeable current account deficit, but at a projected 6.4 percent of GDP in 2024, slightly smaller than the 6.8 percent deficits in 2023," the report explained.
It also noted that these projections assume that the conflict in the Middle East will not expand.
“If fighting were to worsen or continue for a protracted period, external account deficits in countries neighbouring Gaza could be exacerbated by declining tourism. Egypt would likely take an additional hit from lower revenues from the Suez Canal because more shipping would reroute from the Red Sea," the report expected.
In mid-March, the World Bank announced a $6 billion financing package for Egypt extended over three years in response to the severe impacts of the conflict in the Middle East on the northern African economy.
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