This projection is the highest among oil importer countries across the Middle East region.
Egypt lowered its expectation for real GDP growth in FY2022/2023 – which starts 1 July – to 5.5 percent, down from 5.7 percent expected in January, amid the ongoing war in Ukraine.
In its World Economic Outlook report, released on the sidelines of the IMF and the World Bank Group’s annual meetings, the Fund expected Egypt’s inflation to record 7.5 percent in 2022 and to accelerate to 11 percent in 2023.
Egypt’s headline annual inflation rate registered 12.1 percent in March 2022 compared to 4.8 percent in March of last year, as it rose by 2.1 percent from February to March. The rate accelerated in urban areas to 10.5 percent – up from 8.8 percent recorded in February – according to the latest readings announced by the Central Agency for Public Mobilisation and Statistics (CAPMAS).
For the country’s current account balance, the report projected it to decline to -4.3 percent in 2022, down from 4.6 percent in 2021, which is the same level expected in 2023.
It also projected Egypt’s unemployment to fall to 6.9 percent in both 2022 and 2023.
According to CAPMAS, Egypt’s unemployment rate dropped by 0.5 percent to reach 7.4 percent in 2021, down from 7.9 percent posted in both 2020 and 2019.
Egypt is currently in talks with the IMF to obtain a fresh loan for the sake of supporting the country's economy against the harsh impacts of the Russian-Ukrainian conflict and the already existing impacts of the pandemic.
If approved, the loan would be the third IMF loan for Egypt since 2020 and the fourth since 2016.
On a regional level, the report projected the real GDP growth of the Middle East and North Africa (MENA) region to slow down to 5 percent in 2022 and 3.6 percent in 2023 down from 5.8 percent posted in 2021 amid the ongoing economic challenges.
It also expected spillovers from tighter global financial conditions, reduced tourism, and secondary demand spillovers to hold back the region’s growth, particularly for oil importers.
“Global economic prospects have worsened significantly since our last World Economic Outlook forecast in January. At the time, we had projected the global recovery to strengthen from the second quarter of this year after a short-lived impact of the Omicron variant. Since then, the outlook has deteriorated, largely because of Russia’s invasion of Ukraine—causing a tragic humanitarian crisis in Eastern Europe—and the sanctions aimed at pressuring Russia to end hostilities,” the report highlighted.
Accordingly, the IMF lowered its projections for the global GDP growth to 3.6 percent in 2022 and 2023—0.8 and 0.2 percent lower than its estimations in January.
The report also underscored that the war led to significant capital outflows from the emerging market and developing economies, tightening financial conditions for vulnerable borrowers and net importers of commodities, and putting downward pressure on the currencies of the most exposed countries.
For the inflation wave, which has been amplified under the war pressure, the report predicted it to remain elevated for longer than in its January forecast, which was released prior to the war. “This projection is driven by war-induced commodity price increases and broadening price pressures”, the report explained.
Based on that, the report expected global inflation at 5.7 percent in advanced economies and 8.7 percent in emerging market and developing economies—1.8 and 2.8 percent higher than projected in January.
Yet, the report noted that the uncertainty surrounds these forecasts.
“Worsening supply-demand imbalances—including those stemming from the war—and further increases in commodity prices could lead to persistently high inflation, rising inflation expectations, and stronger wage growth. If signs emerge that inflation will be high over the medium term, central banks will be forced to react faster than currently anticipated—raising interest rates and exposing debt vulnerabilities, particularly in emerging markets,” the report explained.