Egypt's growth forecast unchanged in latest IMF report

Nevine Kamel from Peru, Tuesday 6 Oct 2015

Growth rates in developing countries in 2015 fell to 4% and the global growth rate to 3.1%

The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. Source: Reuters

The International Monetary Fund (IMF) has kept its forecasts for Egypt's growth at 4.2 percent in 2015 and 4.3 percent in 2016, revealed in a report released on Tuesday at the World Economic Outlook in Lima.

The IMF expects consumer prices to increase in 2015 to 11 percent compared to 10.1 percent in 2014 and slow to 8.8 percent in 2016.

The IMF foresees Egypt's deficit falling by 0.8 percent to 3.7 percent in 2015 and 4.5 percent in 2016 compared to 13.4 percent in 2014.

Egypt's savings following the drastic oil price drop was a main factor allowing the economy to maintain its performance, according to an IMF official.

"But this is an unsustainable factor," said the official, noting that commodity prices continue to fall.

"The fall in commodity prices, which accelerated recently, will have a dramatic impact on developing countries, especially those that export them," said Maurice Obstfeld, IMF research director.

Developing countries currently contribute more than half of the world's gross domestic product.

Hence the report expects global economic growth to slow to 3.1 percent in 2015, which is 0.2 percent less from July 2015 forecasts in and 0.3 percent less than those from 2014.

"The world economy is going through a crucial phase at the moment, with challenges facing developed countries, but soon the slowdown will hit developing countries too," said Obstfeld.

"In an environment characterized by low commodity prices, and lower capital flows to emerging markets and the dependence of their national currencies to the global pressure, and the rise in volatility in the financial markets, the downside risks facing the economic outlook rise, especially for the economies of emerging markets and developing economies," the report says.

Financial markets saw a sharp increase in volatility in August following the devaluation of the Chinese yuan, with an increase in global risk aversion, weak currency values in many emerging markets, and a sharp correction in stock prices worldwide.

The temporary rise in volatility was linked to events surrounding Greece's debt negotiations and the sharp drop in China's stock market, as well as subsequent policy measures taken by the Chinese authorities in June and July.

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