Egypt’s growth is expected at 3.4 percent during the current fiscal year (FY) 2020/2021 despite vulnerabilities, said Fitch Solution, a provider of credit and macro intelligence.
Fitch made the announcement during a virtual panel on Thursday to release its “Country Deep-Dives, A Closer Look At Growth Prospects In the GCC States and Egypt” report.
Weak prospects for tourism, investment, and remittance inflows will continue to dampen Egypt’s growth performance, Fitch added.
The International Monetary Fund (IMF) loan Egypt received due to the COVID-19 crisis and eurobond issuance are expected to support the country’s external position, though risks of renewed volatility persist, the company said.
In May, Egypt received a one-tranche loan worth $2.4 billion from the IMF under the rapid finance instrument to address the repercussions of the pandemic.
In June, the IMF gave Egypt $2 billion, which was the first tranche of a $5.2 billion loan under a 12-month stand-by agreement. The remainder will be disbursed over two reviews in December 2020 and June 2021.
According to Fitch, mobility data shows that the worst phase of the pandemic is over and that retail, recreation, grocery, pharmacy, transit stations and work places have started to rebound after a deep reduction in May.
Purchasing manager index and Google mobility data point to widespread disruption to local activity in the second quarter of 2020, though conditions are now easing, Fitch added.
An aggregate real GDP growth of 3.5 percent is forecast for the Middle East and North Africa (MENA) region in 2021, following a contraction of 5.1 percent in 2020, Fitch said, stressing that the global economy will rebound in 2021, while MENA is likely to underperform.
Discussing large oil producing countries, Fitch said Iran accounts for a large share of the gains projected for 2021 in light of the expectations that US presidential candidate Joe Biden will win in the November elections, resulting in sanctions relief for the Islamic republic.
The outlook for other oil producers appears sluggish, as only moderate oil price increases are likely to result in limited oil output growth and continued fiscal restraint, according to Fitch.
Concerning other countries in the region, limited policy flexibility coupled with social and political instability are weighing on prospects for a post-coronavirus recovery, it added.
Fitch's head of MENA Country Risk Andrine Skjelland said the US elections could shift US policy towards MENA in 2021 in case Biden won. He will probably introduce more conditionality to US partnerships with Arab states, but is likely to avoid causing major rifts with key allies in the region.
“Biden would be highly reluctant to get the US involved militarily in MENA conflict zones. Conversely, should Trump secure re-election, then he would likely continue his maximum pressure campaign against Iran, while maintaining his steadfast support for Arab state allies and Israel,” said Skjelland.
In reply to Ahram Online regarding the effects of a likely second wave of COVID-19 on the region’s economic activity, including Egypt, Skjelland noted that it depends on finding a vaccine, especially that infections have increased recently.
She added that Egypt was the first country in the region to implement pre-emptive and precautionary measures to mitigate the impact of the coronavirus on the economy and people's lives.