File Photo: An Egyptian woman shops at a fruit market in Cairo. AFP
In its economic updated report for MENA region, the WB noted its forecast for GDP growth in Egypt for these two fiscal years falls below the 6.6 percent achieved by the country in FY2021/2022.
The WB report cited improvements in the country’s reserves due to the increase in revenues of tourism and Suez Canal as well as foreign financing.
However, the WB report found that hard currency shortage in the country persists.
Moreover, the WB report said that the country’s capital and financial account would remain under pressure.
The WB report expects that the budget deficit would widen to seven percent of GDP at the end of the current FY2022/2023, up from 6.2 percent in FY2021/2022.
Fiscal pressures and the valuation effect from the Egyptian pound devaluation are projected to drive the country’s debt-to-GDP ratio to projected 95.5 percent by end of current FY2022/2023, up from 88.3 percent a year earlier.
“The $1.5 billion Sukuk [that were recently issued] provided some relief for external debt repayment during current FY2022/2023,” the report noted.
However, the WB cautioned that the burden of the high interest rate of these Sukuk “may discourage further issuances before international financial conditions improve.”
Inflation forecast: Good news
On the other hand, the WB projected that the inflation rate would drop to 18.9 percent by the end of FY2022/2023, down from the current 30.9 percent.
The inflation rate in FY2023/2024 would drop to 15 percent by the end of FY2023/2024, the report added.
The WB also projected that Egypt’s current account balance would drop to 3.4 percent in 2023 and three percent in 2024, down from 3.5 percent recorded in 2022.
MENA: Slowing down
On a regional level, the WB expected economies in the Middle East and North Africa (MENA) region to grow at a slower pace in 2023.
It said soaring inflation, driven by increases in food prices mainly, would pressure on poorer households and raise food insecurity across the region.
It projected MENA’s GDP growth to slow to 3 percent in 2023, down from 5.8 percent achieved in 2022.
The WB said “oil exporters, who benefited from a windfall in 2022, will experience slower growth.”
Despite that, “a large gap remains between high-income countries and the rest of the region,” the report said.
“Real GDP per capita growth, a better proxy for living standards, is expected to slow down to 1.6 percent in 2023 from 4.4 percent in 2022.”
Inflation in the region rose dramatically in 2022, particularly in countries that experienced currency depreciations, the report noted.
In this respect, the WB said eight out of 16 countries suffered from double-digit food price inflation or higher, which disproportionately affected poorer households who spend more of their budgets on food compared to higher-income ones.
“Food price inflation is having a devastating impact on poor families. The long-term implications of food insecurity will be felt for generations and sadly limit prospects for many, many young people,” said Ferid Belhaj, World Bank Vice President for the MENA region.
“The human and economic cost of inaction is immense and bold policies are needed in a region where young people make up more than half of the population,” Belhaj added.