Output in the southern and eastern Mediterranean region, where Egypt is located, is projected to grow by 3.5 percent in 2021 — with a slow recovery in the tourism sector, mounting fiscal pressures, and political uncertainty in some economies, according to the European Bank for Reconstruction and Development (EBRD).

In its updated report on the regional economic prospects, which covers the economies where the EBRD operates, the region’s growth is expected to increase to 4.6 percent in 2022, supported by structural reforms and recovering foreign direct investment and trade flows.

The launch of the report comes as a part of the EBRD’s annual meeting that is being held currently in a virtual format, which kicked off on Monday and its conclusion is scheduled on Friday.

For Egypt, the EBRD revised down its projections for Egypt’s output growth to 4.2 percent in 2021, down from the 5 percent expected in October 2020, according to the report.

Yet, the EBRD expected Egypt’s economic growth to considerably bounce back to 5.2 percent in 2022, according to the report.

The report said that the country’s economic growth in the first three quarters of FY2020/2021 (July 2020 – March 2021) in Egypt averaged 1.9 percent (Y-o-Y), following a slowdown in growth in FY2019/2020 to 3.6 percent.

This growth was driven by improvements in wholesale and retail trade, agriculture, telecommunications, and construction.

On the other hand, the sluggish manufacturing activity and weak tourism caused a slowdown in Egypt’s recovery, according to the report.

It added that the pace of the country’s GDP’s recovery is expected to slow to 2.5 percent growth in FY2020/21, before rebounding to 4.5 percent in FY2021/22.

“The boom in the telecommunications sector will continue to sustain growth, falling unemployment rates will support consumption, and private investment and foreign direct investment (FDI) flows will pick up. However, risks include a slow uptake of vaccination, the weak outlook in the tourism sector in view of a probable global delay in tourism recovery, as well as the slowing momentum of major projects implemented in different parts of the country,” the report explained.

On the regional level, output in the EBRD’s regions is projected to grow by 4.2 percent in 2021 and 3.9 percent in 2022, representing an upward revision compared with the forecasts made in September 2020.

“The revisions reflect strong exports, extended fiscal support packages, and faster phasing out of social distancing. These revisions mirror the stronger expected pace of recovery in the global economy,” the report illustrated.

The report noted that inflation in the EBRD’s regions picked up to the average of 4.2 percent (Y-o-Y) by the end of May 2021, exceeding their end of 2019 level by 0.8 percent.