World Bank maintains Egypt real GDP projections till 2026

Doaa A.Moneim , Wednesday 12 Jun 2024

​The World Bank maintained its projections for Egypt’s real GDP growth in both 2024 and 2025 at 2.8 percent and 4.2 percent, respectively, compared to the last projections released in April, according to the Global Economic Prospects report released on Tuesday.

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File Photo: The World Bank building. AFP

 

The report also expected the country’s GDP to grow to 4.6 percent in 2026.

The report forecasted Egypt’s GDP growth to attain the same projections for the current FY2023/2024 and the coming FY2024/2025 and FY2025/2026.

It attributed that partly to weaker manufacturing activity, with import restrictions, a decline in the gas extractives sector operations, lower shipping through the Suez Canal, slower investment partly owing to limited private sector credit, and a dampened recovery in tourism sector due to the regional conflict.

Additionally, it attributed the real GDP growth recovery in FY2024/2025 and FY2025/2026 to the Ras El-Hekma successful development deal signed with the UAE in February.

Private consumption in Egypt is also expected to expand, driven by a rebound in expat remittance inflows and a decline in inflation.

Moreover, the report expected that the exchange rate depreciation would boost the country’s net exports.

 

 

In January, the World Bank lowered its forecasts for Egypt’s real GDP growth for 2024 to 3.5 percent from 3.7 percent in a previous estimate.

Furthermore, the report slightly upgraded its expectations for the GDP growth of the Middle East and North Africa (MENA) region to 2.8 percent in 2024, while keeping the forecast for 2025 at 4.2 percent.

“After slowing to 1.5 percent in 2023, growth in MENA is expected to pick up in 2024 and 2025, mainly due to a gradual resumption of oil production. The outlook for 2024 has weakened since January, partly reflecting extensions of additional voluntary oil production cuts and the ongoing conflict in the Middle East centered in Gaza,” the report explained.

Yet, it pointed out a set of downside risks that threaten the GDP growth in the region, including an escalation of armed conflicts, heightened local violence and social tensions, a sudden tightening in global financial conditions, more frequent or severe natural disasters, and weaker-than-projected growth in China.

“Conversely, stronger-than-expected activity in the United States and associated spillovers entail an important upside risk,” the report added.

Geopolitical tensions and policy uncertainty are elevated in MENA. At the same time, the human suffering and destruction of physical capital in the West Bank and Gaza arising from the conflict in the Middle East are immense, it noted. 

 

 

In addition, the report stressed that this conflict has led to wider regional spillovers, including the Islamic Republic of Iran, Lebanon, and Syria.

It also stated that the Houthi attacks on the Red Sea shipping have reduced transit through the Suez Canal, disrupted international trade, and heightened policy uncertainty, particularly in neighbouring countries.

The report projected the GDP growth of the developing countries to recover to four percent in 2024 and 2025, slightly slower than in 2023, while that of the low-income economies is forecasted to accelerate to five percent in 2024.

However, it said the global economy is stabilizing after several years of negative shocks.

Accordingly, the report expected the global real GDP growth to hold steady at 2.6 percent in 2024, despite the geopolitical tensions and high interest rates, before rising to 2.7 percent in 2025 and 2026 alongside modest expansions of trade and investment.

Meanwhile, it predicted global inflation to ease at a slower pace than previously assumed, averaging 3.5 percent in 2024.

“Central banks in both advanced economies and emerging market and developing economies (EMDEs) are likely to remain cautious in easing policy. As such, markedly higher interest rates than prior to the pandemic are set to sustain for an extended period,” the report pointed out.

 

 

Despite some improvement, the report projected global growth over the forecast till 2026 to be nearly 0.5 percent the pre-pandemic levels, with a slower pace of expansion in economies comprising over 80 percent of the global population.

It also expected the EMDE growth to slow from 4.2 percent in 2023 to four percent in 2024.

The World Bank Group has committed $6 billion in financing bailout over three years for Egypt in response to the Israeli war on Gaza and its associated implications on the trade transition in the maritime lane of the Suez Canal, one of the key resources of the country’s GDP and a key generator of foreign exchange inflows.

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