Egyptian economy seen growing 5.3 per cent in year to June, 5.2 per cent in 2022/23

Egypt’s economy will grow 5.3 per cent in the fiscal year ending in June but the pace will ease to 5.2 per cent in 2022/23 and 5.0 per cent in 2023/24 as tourism falls and commodity prices and interest rates rise, a Reuters poll showed on Thursday.

The planning ministry in November expected growth to reach 5.6 per cent this fiscal year, and the finance ministry said in January it was aiming for 5.7 per cent growth in its 2022/23 fiscal year draft budget.

But last month the planning ministry lowered its real gross domestic product (GDP) growth target for 2022/23 to 5.5 per cent, citing the effects of the Russia-Ukraine conflict.

A Reuters poll three months ago had forecast 2021/22 growth of 5.2 per cent.

One of the world’s top wheat importers, Egypt imported most of its grain from Russia and Ukraine, which also supplied a large number of its tourists.

Meanwhile, the Russian invasion prompted investors to pull billions of dollars out of Egypt’s treasury market.

“Prolonged high food and fuel prices may restrict consumer spending. Significant loss of tourism from Europe and Russia may dampen economic growth. Rising interest rates may curtail investment,” said Garbis Iradian of the Institute of International Finance (IIF).

Tourism was devastated by the COVID-19 pandemic, with revenue plummeting to $4.9 billion in 2020/21 from $9.9 billion a year earlier. It bounced back to $5.8 billion in July-December 2021.

In the latest Reuters poll, economists expected annual urban consumer price inflation of 8.2 per cent in 2021/22, 9.8 per cent in 2022/23 and 7.6 per cent in 2023/24.

Egypt’s inflation accelerated in March to 10.5 per cent, its highest in nearly three years, caused in part by commodity shortages after the Ukraine crisis, data from the state statistics agency CAPMAS showed. The central bank’s inflation target range is from 5 per cent to 9 per cent.

“We expect that the rise in commodity prices will be temporary and a recovery should happen in FY24,” said Pascal Devaux of BNP Paribas.

Egypt’s currency will remain relatively steady at 18.35 pounds per dollar by the end of 2022, the April 11-20 poll of 19 economists showed. The central bank on March 21 allowed the currency to weaken to around 18.45 to the dollar from its previous level of 15.70.

Economists expect the pound to weaken to 18.89 by the end of 2023 and to 18.95 by end-2024.

The central bank is expected to raise its overnight lending rate to 10.75 per cent from June versus 10.25 per cent now, then increase it to 11.25 per cent by end-June 2023 before cutting it to 10.75 per cent by end-June 2024, the poll found.