Being an emerging market, Egypt is expected to witness a real GDP growth slowdown from 2020 to 2024 to reach approximately 4.5 percent, down from five percent in 2015-2019, due to the COVID-19 repercussions, said Cedric Chehab, global head of country risk at Fitch Solutions.
In a webinar held by Fitch Solutions on Thursday to review its global macroeconomic quarterly update, attended by Ahram Online, Chehab said that Egypt is among the emerging markets whose fiscal deficits are expected to remain wide with about 10 percent of Egypt’s GDP until 2024, and to be the top country among emerging markets to suffer such deficits.
Chehab said emerging markets’ output will see a contraction by 1.5 percent in 2020, driven by lockdowns and declines in investment, consumption and trade.
He said emerging markets have turned their focus, amid the crisis, on monetary policies, which are much smaller programmed than in developed markets, with a focus on smoothing market variations, rather than large-scale asset purchases.
“While markets have not yet responded negatively, we see significant longer-term risks. Given weaker monetary institutions, and in some cases independence, excessive use of QE could lead to rising inflation in EMs and significant currency weakness,” Chehab illustrated.
Brazil, India, Turkey, Thailand, Mexico and Russia, the bigger emerging markets, are facing the sharp contraction, as their manufacturing purchasing managers’ index (PMI) sinks deep, according to Chehab.
Amid the concerns of a second wave of the pandemic, Chehab explained that emerging markets now make up the majority of new cases, and there is a risk that the disease will become an endemic in poorer emerging markets where the authorities are not able to contain it.
Less access to healthcare services means less testing, diagnosing, treating and quarantining, which is expected to weigh on growth and could delay the much-needed recovery in such markets, Chehab warned.
Global output is also expected to contract by 3.6 percent in 2020, but rebound by four percent in 2021 driven largely by developed markets, which will see output fall by 5.1 percent in 2020 given their weak fundamentals and low growth buffers, according to Chehab.
Quarter on quarter growth is projected to resume in the third quarter of 2020, but the recovery will be bumpy and uneven and the global economy will remain vulnerable to additional shocks. However, risks are looking more balanced than before, said Chehab.