IMF lowers projections for Egypt’s real GDP growth in FY2023/2024 to 3%

Doaa A.Moneim , Tuesday 30 Jan 2024

The International Monetary Fund (IMF) has downgraded its forecasts for Egypt’s real GDP growth in the current FY2023/2024 to three percent, down from the 3.6 percent it projected in October, according to the updated World Economic Outlook (WEO) report released on Tuesday.



The Fund has also lowered its projections for the country’s real GDP growth in the incoming FY2024/2025 to 4.7 percent, down from the five percent it projected in October, the WEO’s data showed.

In October, the IMF raised its projections for Egypt’s real GDP growth in 2023 to 4.2 percent, up from the 3.7 percent it expected in July while lowering its forecast to 3.6 percent in 2024, down from the 4.1 percent it forecasted in July.

An IMF mission is now in Egypt to discuss a possible additional financing package for the country that is suffering a severely challenging economic situation amid the repercussions of global and regional tensions.

Egypt is currently experiencing harsh economic woes — mainly the severe shortage of the US dollar, the rising prices of staples and services, and the weak foreign direct investment (FDI) inflows.

On a regional level, the report projected the real GDP growth of the Middle East and Central Asia to rise from an estimated two percent in 2023 to 2.9 percent in 2024 and 4.2 percent in 2025, with a downward revision of 0.5 percent for 2024 and an upward revision of 0.3 percent for 2025 compared to October’s projections.

“The revisions are mainly attributable to Saudi Arabia and reflect temporarily lower oil production in 2024, including from unilateral cuts and cuts in line with an agreement through OPEC+ (the Organization of the Petroleum Exporting Countries, including Russia and other non-OPEC oil exporters), whereas non-oil growth is expected to remain robust,” the report explained.

Addressing the escalation in Gaza, the report said the conflict could escalate further into the wider region, which produces about 35 percent of the world’s oil exports and 14 percent of its gas exports.

“Continued attacks in the Red Sea––through which 11 percent of global trade flows––and the ongoing war in Ukraine risk generating fresh adverse supply shocks to the global recovery, with spikes in food, energy, and transportation costs. Container shipping costs have already sharply increased, and the situation in the Middle East remains volatile,” the report expected.

It added that further geo-economic fragmentation could constrain the cross-border flow of commodities, resulting in additional price volatility.

Meanwhile, growth is expected to remain at 4.1 percent in 2024 and to rise to 4.2 percent in 2025 in emerging market and developing economies. This projection reflects an upward revision of 0.1 percent for 2024 since October 2023.

Globally, the report has raised its projections for the real GDP growth by 0.2 percent in 2024 to 3.1 percent and 3.2 percent in 2025, compared to October’s expectations, mainly driven by the greater-than-expected resilience in the United States and several large emerging markets and developing economies, as well as fiscal support in China.

Yet, the report highlighted that these projections are below the historical (2000–2019) average of 3.8 percent, with elevated central bank policy rates to contain inflation, a withdrawal of fiscal support as a result of high debt weighing on economic activity, and low underlying productivity growth.

For inflation, the report said it is falling faster than expected in most regions, amid unwinding supply-side issues and monetary policy tightening.

In this respect, the report expected global headline inflation to drop to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down.

Moreover, it expected the global trade growth to still be below the historical growth average of 4.9 percent.

Accordingly, the report projected global trade to grow at 3.3 percent in 2024 and 3.6 percent in 2025.

“Rising trade distortions and geo-economic fragmentation are expected to continue to weigh on the level of global trade. These forecasts are based on assumptions that fuel and nonfuel commodity prices will decline in 2024 and 2025 and that interest rates will decline in major economies,” the report explained.

Thus, the report expected annual average oil prices to fall by about 2.3 percent in 2024, whereas nonfuel commodity prices are anticipated to fall by 0.9 percent.

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