Egypt, considered the top investment destination for the European Bank for Reconstruction and Development (EBRD) in 2020, had the best economic performance during the Covid-19 pandemic among all the countries the EBRD is operating in, a fact that made it one of the only three countries where the EBRD has activities in the region which witnessed positive economic growth in 2020, commented Managing Director of the EBRD for the Southern and Eastern Mediterranean Region Heike Harmgart in an interview with Al-Ahram Weekly.
On the EBRD’s vision of the Egyptian economy’s performance im 2021 and 2022, Harmgart said that it projected Egypt’s real GDP to grow by 4.2 per cent in 2021, 0.8 per cent lower than the bank’s forecasts in 2020. However, it expected the rate to increase to 5.2 per cent in 2022, a level close to the rates accomplished before the pandemic.
The economic growth rate in the first three quarters of the 2020-21 fiscal year averaged 1.9 per cent following a slowdown in growth in 2019-20 to 3.6 per cent, according to the EBRD’s report on regional economic prospects announced during the bank’s annual meetings earlier this week.
The report pointed out that this growth was led by improvements in wholesale and retail trade, agriculture, telecommunications, and construction, but that sluggish manufacturing activity, coupled with weak tourism, had slowed down the recovery.
“Egypt is showing signs of recovery, particularly in trade (wholesale and retail), construction, telecommunication, and agriculture, which all are expected to drive the country’s recovery and growth. On the other hand, the tourism and manufacturing sectors are still suffering the negative repercussions of the pandemic, both globally and domestically, and are experiencing sluggish growth. A number of firms in the manufacturing sector, for instance, are in need of new investments at present,” Harmgart said.
The wide-ranging infrastructure projects that both the government and the private sector are working on at a fast pace are also key drivers for the growth of the economy, she said. Egypt has encouraging economic indicators, including a decline in the unemployment rate, which supports both private investment and consumption, and an increase in foreign direct investment (FDI) inflows into to the country, she added.
However, the slow rate of vaccination against Covid-19 among the population was putting the country at risk. She said that this also has a negative impact on tourism. Unfortunately, Egypt is still on a number of European countries’ red lists as far as Covid-19 is concerned. The faster the pace of vaccination, the quicker tourism will rebound and the higher its revenues will be, Harmgart said.
Asked what was expected for Egypt during the EBRD’s annual meetings, Harmgart noted that Egypt had maintained its position among the top investment destinations of the EBRD, adding that this was a key motive for EBRD President Odile Renaud-Basso to visit the country, one of the few she had visited in person in the pandemic.
In April, Renaud-Basso paid her first official visit to Egypt since entering office in November. In an interview with the Weekly on that occasion, Renaud-Basso said that the EBRD was positive on Egypt’s economy, emphasising the EBRD’s support for Egypt’s small and medium-sized enterprises (SMEs), private sector, green, and financial sectors.
“We really see that Egypt’s interest in investing in the green economy is growing, especially in both the transport and desalination sectors. We see that a number of SMEs are keen on securing finances from local banks for green projects,” Harmgart said.
The EBRD is expected to ink its first green-financing facility deal with local Egyptian banks by the end of July to serve the green economy through financing large and small businesses, she said, a first for the EBRD in Egypt under its new strategy that runs until 2025.
She said that the deal comes at an important time for Egypt, since it has applied to host the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) next year.
“Going green is expected to be a focus area of our operations in Egypt during 2021. Egypt is really well-positioned for meeting global green requirements and the Paris Agreement,” Harmgart said.
Output in EBRD regions is projected to grow by 4.2 per cent in 2021, up from 3.6 per cent expected in September 2020, owing to the phasing out of social-distancing measures and the higher prices of commodities that have benefitted exporters, according to the EBRD economic report.
The EBRD projected its regional growth estimates to moderate slightly to 3.9 per cent in 2022, saying that such forecasts were highly sensitive to the path of Covid-19 infections, among other factors.
Output in the Southern and Eastern Mediterranean, where Egypt is located, is expected to grow by 3.5 per cent in 2021, before accelerating to 4.6 per cent in 2022 supported by structural reforms and recovering foreign investment and trade flows.
“These predictions are highly sensitive to the path of Covid-19 infections, assumptions relating to government policies and their effectiveness in terms of limiting persistent economic damage from the crisis as well as commodity prices,” the EBRD report said.
*A version of this article appears in print in the 1 July, 2021 edition of Al-Ahram Weekly