IIF projects Egypt’s GDP growth at 3.3% for FY2023/24

Ahram Online , Sunday 17 Dec 2023

Egypt's economy is expected to achieve a real growth rate of 3.3 percent during the fiscal year (FY)2023/2024, which ends in June 2024, according to a recent report by the Institute of International Finance (IIF).

The Institute of International Finance (IIF) logo. IIF website
The Institute of International Finance (IIF) logo. IIF website


The expected growth rate represents a slowdown from the 3.8 percent growth achieved in FY2022/2023.

The Egyptian government adjusted its growth forecast for FY2023/24 in early December, lowering the projection to 3.5 percent from the previously anticipated 4.2 percent.

In October, the World Bank revised its growth forecasts for Egypt for 2023 to 4.2 percent, up from 4 percent.

However, the bank downgraded the country's growth forecast for 2024 to 3.7 percent, down from 4 percent.

Following suit, the International Monetary Fund (IMF) adjusted its predictions, increasing Egypt's real GDP growth projection for 2023 to 4.2 percent from 3.7 percent, while lowering the forecast for 2024 to 3.6 percent from 4.1 percent.

Exports decline

The IIF highlighted several factors that could cause a decline in Egypt's exports in FY2023/2024, including growing inflation, a shortage of foreign currency, geopolitical tensions, and disruption in commodity supply, which are anticipated to weaken private-sector consumption.

Due to export restrictions during the summer months, which were imposed to meet strong domestic demand for energy, the institute stated that Egypt's hydrogen exports could go down in the current FY.

Furthermore, tensions in the Middle East, including the conflict in Gaza, have impacted the import of Israeli natural gas to Egypt, which in turn, has hurt the country's re-exports of liquefied natural gas (LNG), IIF added.

Egypt’s trade deficit declined by 23.59 percent during the fiscal year 2022/2023, primarily due to a significant decline in non-oil imports.

Financing gap

Additionally, the IIF indicated that the financing gap in Egypt could reach $7 billion during FY2023/24, adding that this "could be financed mainly through foreign direct investments and official cash flows."

In October, Minister of Finance Mohamed Maait said that the country has a financial gap ranging between $6 and $8 billion for FY2023/2024.

In January, the International Monetary Fund (IMF) expected that Egypt would experience a $17 billion financing gap through 2026.

Egypt's $3 billion loan programme

The IIF further expected that the IMF programme for Egypt could witness progress at the beginning of 2024, after the end of the presidential elections, anticipating another major devaluation of the currency, which could enable the country to move to a flexible currency exchange rate.

The difference between the official exchange rate of the Egyptian pound against the USD and the parallel market price currently amounts to about 40 percent, the IIF said.

In the same context, British bank HSBC projected the Egyptian pound to experience devaluation, reaching EGP 40-45 against the US dollar, during the first quarter of 2024.

Egypt devalued its local currency three times since March 2022, in an attempt to address the severe crisis it faces in the scarcity of the dollar and high inflation, causing the Egyptian pound to lose nearly half of its value.

"Adjusting the exchange rate could also pave the way for the state’s privatization plans, which could generate $5 billion during the current fiscal year," the IIF indicted.

The institute also said that the Egyptian privatization programme (IPO) will allow the country to obtain loans from its partners in the Gulf Cooperation Council (GCC).

In conclusion, the IIF indicated that there are fundamental risks that threaten its outlook, including the failure to reach an agreement with the IMF, and the continuation of the war on Gaza.

These factors could lead to a wider current account deficit, insufficient external financing, and thus a decline in foreign currency reserves to critical levels.

"In this case, Egypt could move forward by imposing additional restrictions on the import of goods as it did in the last fiscal year," the report added.

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