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Egypt: Economy grows amid the pandemic

Egypt’s economy has been doing well despite the coronavirus pandemic and should continue on the same path

Ahmed Kotb , Friday 30 Jul 2021
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Egypt’s economic growth is expected to rebound strongly to 5.2 per cent in the 2021-22 fiscal year, according to the International Monetary Fund (IMF), almost doubling the 2.8 per cent growth for 2020-21.

President Abdel-Fattah Al-Sisi directed the government to keep up its strong economic performance in a meeting with Prime Minister Mustafa Madbouli and Minister of Finance Mohamed Maait on Sunday.

The president said that maintaining high growth rates was important to stabilise monetary and financial conditions, adding that data should be regularly updated to monitor the country’s economic development.

He recommended increasing public investment, saying that this would help to meet development needs within the framework of the Egypt Vision 2030 strategy.

Maait said during the meeting that the government had managed to boost the country’s revenues by LE119 billion, a 12.2 per cent increase, in addition to achieving a primary budget surplus of about LE93.1 billion, or 1.4 per cent of GDP.

He stressed that the budget deficit had fallen from eight per cent to 7.4 per cent of GDP, adding that Egypt had been one of the most successful countries in reducing its debt-to-GDP ratio despite the coronavirus pandemic that had led many other countries to increase their debt.

“Egypt has succeeded in raising the efficiency of public debt management, and its debt-to-GDP ratio declined from 108 per cent of GDP during fiscal year 2016-17 to 90.6 per cent by the end of fiscal year 2020-21,” he explained.

The IMF said in a report published last week that the economic and social impact of the coronavirus pandemic over the past year had been well-managed by the Egyptian authorities.

“Timely and prudent fiscal and monetary easing shielded the economy from the full brunt of the crisis, while alleviating the health and social impact of the shock,” the report said, adding that the economic policies adopted had helped to deliver macroeconomic stabilisation, safeguard debt sustainability, and preserve investor confidence.

Uncertainty related to the pandemic, high public debt, and large gross financing needs were all cited in the report as reasons that could leave Egypt vulnerable to external shocks or changes in economic conditions, however.

But the IMF expects growth to rebound in the 2021-22 fiscal year, noting that Egypt was one of the few emerging market countries that experienced a positive growth rate in 2020.

Celine Allard, chief of the IMF mission to Egypt on the stand-by agreement (SBA) programme, expects Egypt’s real GDP growth to rebound significantly in the current fiscal year to 5.2 per cent, up from 2.8 per cent in 2020-21.

Her remarks came during a virtual press conference on the IMF’s second review of Egypt’s economic reform programme.

The IMF also predicts that Egypt’s foreign direct investment (FDI) is expected to grow over the next four years, jumping by about 60 per cent during the 2021-22 fiscal year to a total value of $8.6 billion.

It expects that FDI will rise to $11.7 billion in 2022-23 and to $16.5 billion in the 2024-25 fiscal year.

Tourism revenues are also expected to increase to $8 billion in 2021-22, according to the IMF, up from a projected $4.4 billion in 2020-21. These revenues will rise to $15 billion in 2022-23, reaching $25.1 billion in the 2024-25 fiscal year, the IMF said.

According to the IMF, Egyptian exports are expected to increase from $29.4 billion during the current fiscal year to $32.1 billion in the 2024-25 fiscal year, but will be outpaced by a growth of imports from a projected value of $65.9 billion this fiscal year to $83.8 billion by 2024-25.

The government announced on 19 July that Egypt’s non-oil exports had increased by 23 per cent during the first half of 2021, compared to the same period last year. Non-oil exports in the first six months of 2021 were valued at $15.4 billion, compared to $12.5 billion in the first half of 2020.

According to Forbes Middle East’s list of the largest economies in the Arab region, Egypt is placed third with total GDP expected to reach $394.3 billion in 2021, up from $361.8 billion in 2020.

Saudi Arabia and the UAE came first and second, with projected total GDP for 2021 of $804.9 billion and $401.5 billion, respectively, up from $701.5 billion and $354.3 billion in 2020.

A survey carried out by Reuters and published on Monday predicted that Egypt’s economy will grow by five per cent in the current fiscal year that ends in June 2022. The survey showed that Egypt’s GDP was forecast to grow by 5.5 per cent in the 2022-23 fiscal year.

 *A version of this article appears in print in the 29 July, 2021 edition of Al-Ahram Weekly.

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