Fitch Solutions revises up Egypt’s real GDP growth to 5.5% through end of 2022

Doaa A.Moneim , Monday 4 Apr 2022

Fitch Solutions upgraded Egypt’s real GDP growth forecast to 5.5 percent in 2022, up from the 5.3 percent it projected in February, which is the government’s target for the year, according to Fitch Solutions’ MENA Monthly Outlook Report.

constructions
Investing in real estate stimulates the economy photo: Reuters

In January, responding to the ongoing challenges caused by the Russian-Ukrainian conflict, the Egyptian government lowered its expectations for the country’s real GDP growth in the upcoming FY2022/23 — which starts on 1 July — to 5.5 percent, down from the 5.7 percent previously projected.

Egyptian officials are currently in talks with the International Monetary Fund (IMF) to design a new programme that aims to support the country's ongoing structural reform programme and to preserve its gains the gains in the face of the repercussions of the Russian-Ukrainian war.

The IMF has said that Egypt needs a set of macroeconomic and structural policy measures in order to alleviate the impact of this shock on the Egyptian economy, protect the vulnerable, and keep Egypt’s resilience and medium-term growth prospects.

Shared with Ahram Online, the report also raised its projections of the country’s inflation in 2022 to hit 10 percent, up from the 7.1 percent it expected in February, to have the third highest inflation rate in the region following Lebanon and Iran.

Egypt’s annual headline inflation accelerated in February to 10 percent, up from eight percent in January, according to the latest data published by the Central Agency for Public Mobilisation and Statistics (CAPMAS).

On a regional level, the report said that North Africa and the Levant will be the most impacted in MENA by the Russian-Ukrainian conflict.

It explained that higher food prices will impact the external position of most economies in North Africa and the Levant given their deficits in the cereal trade balance.

“If wheat prices remain elevated, exceeding their current levels, this will deepen the current account deficits in North African and Levantine economies. Some MENA countries have a high dependency on cereal imports from Russia and Ukraine. This could increase risks of supply disruptions, especially after Ukraine banned wheat exports for the remainder of 2022,” according to the report.

Moreover, the report predicted an increase of social stability in the region driven by rising risks to food security, a pick-up in inflation — especially food inflation — and slower economic growth amid the ongoing challenges.

In this respect, the report projected North Africa’s average inflation to rise from 4.8 percent in 2021 to 7.9 percent in 2022.

Meanwhile, the report anticipated that Russia’s invasion of Ukraine to have significant negative repercussions on net hydrocarbon importers’ real GDP growth in the MENA region.

“Higher inflation, tighter monetary policy, and limited room to significantly increase subsidies and/or expand the social safety net will weigh on private consumption in these economies,” the report illustrated.

“Meanwhile, higher oil prices will likely trigger more investment in some oil exporters, prompting us to revise our growth forecasts up for some of these economies. This is because we believe that higher oil-related revenues will allow for greater investment spending, which will more than offset the inflationary impact on private consumption.”

Short link: