Positive macro-economic indicators gave Egypt’s economy boost in 2019: Oxford Business Group

Doaa A.Moneim , Tuesday 4 Feb 2020

Oxford Business Group

Egypt’s economy was given a boost in 2019 due to positive macro-economic developments on the back of its economic reforms, according to a 2019 review released by the Oxford Business Group.

The report said that real GDP growth was at 5.6 percent in fiscal year 2018/2019, up from 5.3 percent in the previous fiscal year, while the Egyptian pound strengthened against the dollar over 2019, reaching EGP16.40 to the dollar by mid-September and dipping below EGP 16 in December.

“The extended facility that was introduced to Egypt from the International Monetary Fund (IMF) as a $12 million loan, supported wide-ranging reforms and addressed inconsistent policies that had resulted in fiscal imbalances, as well as high inflation and public debt. Another target was dwindling foreign exchange reserves, a result of the fixed exchange rate between the Egyptian pound and the US dollar,” reads the report.

Additionally, the annual headline inflation rate reached 7.1 percent, which was within the Central Bank of Egypt's (CBE) target range of 9 percent, plus or minus three points, the report said.

It added that the benefits of the floatation of the Egyptian pound in 2016 began to be felt in 2019, with company profits reaching pre-floatation levels by the end of November.

In the petroleum sector, the report highlighted that significant oil and gas discoveries in the eastern Mediterranean in March and July are set to reduce the import burden of the chemical and plastics industries through the development of downstream segments, but there are concerns that the discoveries could also aggravate the predominance of hydrocarbons in the economy.

On the other hand, the report said that there are number of challenges that remain in terms of implementing these reforms, especially the pressure on consumer spending as nominal wage growth fell below inflation between 2016 and 2018.

Egypt has also undertaken several legislative reforms that have had notable effects, the report noted, including changes to the income tax law which boosted government revenues, while the investment environment has been strengthened by amendments to the investment law and the implementation of the competition law.

In addition, the industrial licensing regime has been streamlined, reducing the time it takes to obtain a license in low-risk industries by 80 percent.

The report rpedicts Egypt will continue moving ahead with plans to transform its renewable energy capacity in 2020, spearheaded by the development of a major solar power station in November.

Meanwhile, the 1.4 gigawatt Benban Solar Park in Aswan has attracted some $2 billion in investment, with around 30 companies already establishing energy projects and commercial operations at the site, adding that meeting domestic power needs through renewable resources will free up oil and gas supplies to be used either for export or in other value-added industries.

“Alongside this, greater emphasis on industries that are not as reliant on imported materials should accelerate growth in various manufacturing segments, among them ready-made garments and food and beverage manufacturing. Tourism is also set for further expansion,” the report forecasted.

Nevertheless, more work needs to be done on social conditions, especially as around 32.5 percent of citizens live below the poverty line, according to a Central Agency for Public Mobilization and Statistics (CAPMAS) report released in July.

 

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