Recent days brought some good news about the Egyptian economy. Despite the Covid-19 pandemic, the government has succeeded in sustaining the country’s economic growth during the last fiscal year thanks to its urgent interventions to minimise the pandemic’s impacts. According to the figures released by the Ministry of Planning, the economy grew by 3.5 per cent during the fiscal year ending 30 June, instead of the predicted 1.9 per cent had these interventions not occurred. Before the coronavirus struck, Egypt had been on track for a 5.8 per cent growth for 2019-2020.
According to Hala Al-Said, minister of planning and economic development, the noticeable improvement in production that Egypt has attained is the product of ongoing efforts that the country has taken and continues to take to stimulate economic and productive activity in combination with the comprehensive plan the government has been carrying out to counter the detrimental economic and social impacts of the Covid-19 pandemic which continues to affect the global and regional economy.
The Ministry of Planning and Economic development released its report on the state of the economy during the Covid-19 pandemic at the end of August. The following five positive indicators it cited should help revive confidence in the economy.
- The Purchasing Managers Index (PMI) for August showed an increase in both production and demand in the non-petroleum private sector for the second month in a row. The PMI in August stood at 20 points higher than its lowest level in April, at the peak of the coronavirus pandemic, indicating that economic deceleration has slowed significantly.
- Non-oil companies experienced increases in both production and new orders during August, benefiting from the initial economic recovery recorded in July. Activity in this sector is on the rebound with new demands and contract requests, even if the pace of expansion is less robust than in the previous month.
- August brought the fastest increase in demand from foreign clients in nearly three years. This is in part due to the reopening of tourist sites and the consequent increase in tourist travel to Egypt. Some Egyptian businesses also registered increases in export contracts.
- Private consumption (or Personal Consumption Expenditures, PCE) increased during the third quarter of the 2019-2020 fiscal year by 5.3 per cent, compared to 1.1 per cent during the third quarter of the 2018-2019 fiscal year. This is an important indicator of economic recovery after periods of sharp economic decline due to uncertainty, drops in real income levels and rising unemployment.
- The general inflation rate in July dropped to 4.2 per cent, down from 5.6 per cent in July 2019. The core inflation rate also declined.
The abovementioned indicators reflect the ability of the Egyptian economy to absorb the negative repercussions of the first wave of the coronavirus pandemic, as well as its potential in confronting the unknown, in view of reports suggesting a higher likelihood of a second wave of the pandemic, regionally and internationally.
It is noteworthy in this regard that the IMF expects Egypt to achieve a positive growth rate of 2.8 per cent in 2020-2021 despite the organisation’s generally negative prognosis for the Middle East as a whole.
*A version of this article appears in print in the 10 September, 2020 edition of Al-Ahram Weekly