Egypt’s economy seen growing 4 per cent this fiscal year as currency weakens

Egypt’s economy will grow 4.0 per cent this fiscal year and 4.5 per cent next even as it endures a continuing depreciation in its currency, a Reuters poll showed on Thursday, in line with a government forecast for the current year.

The country’s already vulnerable economy was shaken further by Russia’s invasion of Ukraine last year, which rocked tourism, raised commodity prices and prompted foreign investors to pull about $20 billion out of its financial markets.

Those troubles pushed Egypt to seek a $3 billion, 46-month financial support package from the International Monetary Fund that was signed in December.

“The Egyptian economy is currently in the midst of some turbulence, with a very uncertain outlook,” with inflationary pressure, a drop in household purchasing power and a slowdown in major infrastructure programmes dragging down growth, BNP Paribas said in a note.

Median forecasts in the April 6-26 Reuters poll of 13 economists was for growth of 4.0 per cent in the fiscal year ending on June 30, 4.5 per cent in 2023/24 and 5.0 per cent in 2024/25.

That forecast matched the 4.0 per cent government predictions in a Nov. 30 letter of intent to the IMF. The presidency said in March Egypt was targeting growth of 5 per cent in its budget for 2023/24.

The poll forecast annual urban consumer price inflation averaging 24.0 per cent in 2022/23 and 20.9 per cent the following year before sinking to 9.3 per cent in 2024/25. That would be above the central bank’s target range of 5 per cent-9 per cent by the fourth quarter of 2024 and 3 per cent-7 per cent by the fourth quarter of 2026.

Egypt’s annual inflation soared to 32.7 per cent in March, just short of its highest on record six years earlier, official data showed this month.

A spike in inflation followed a prolonged shortage of foreign currency, a series of devaluations starting in March 2022 and continuing delays in getting imports into the country.

The Egyptian pound would weaken to 34.00 per dollar by end-December 2023, to 35.00 by end-December 2024 and 35.07 a year later, economists forecast.

Having left the currency unchanged since March 9 at about 30.90 to the dollar despite a promise to the IMF, the central bank said it would allow supply and demand determine its price. In the year before it had allowed the currency to fall by half.

Currently at 19.25 per cent, the overnight lending rate, was expected to rise to 19.75 per cent by end-June before declining to 18.25 per cent the following year and 13.75 per cent the year after, the poll found.