According to a Reuters poll released on Wednesday, Egypt’s economic growth will be slower than anticipated as the value of the pound declines, inflation reduces purchasing power, and the impact of the Gaza crisis eats away at the nation’s primary foreign exchange sources. Early in January, Suez Canal revenue dropped by 40% as a result of Houthi attacks at sea that prevented ships from passing through Yemen. The situation for tourism has also deteriorated due to the October-onset crisis in Gaza, a neighboring country
Pieter du Preez of Oxford Economics stated this week in a client note that “developments over the past month have seen the country being hit hard from various angles and directly to its main revenue generators.”
The outlook for Egypt’s sovereign debt was downgraded from stable to negative last week by international credit rating agency Moody’s.
The International Monetary Fund (IMF) withdrew its $3 billion financial assistance package in December 2022 when Egypt withdrew its promise to sell state assets and transition to a flexible exchange rate regime. Now, in Cairo, an IMF team is debating how to bring the package back to life and perhaps even expand it.
In a Reuters survey of fourteen economists, the median prediction was for gross domestic product (GDP) growth of 3.5% in the fiscal year that started on July 1. This was a decrease from earlier estimates for the same year, which were 3.9% in October and 4.2% in July.
According to the most recent poll, growth will reach 4.15% in 2024–2025; however, this is less than the 4.50% analysts had predicted just three months prior.
The economy shrank from 3.9% in the first quarter of 2023 to 2.9% in the second, according to the central bank’s estimate last month.
The Monetary Policy Committee of the bank said in a statement on December 21 that “Real GDP growth is expected to slow down further during fiscal year 2023/24 before gradually picking up thereafter.”
The Egyptian pound was predicted by the poll’s median currency forecast to weaken to 40.00 to the US dollar by the end of June 2024 and 43.00 by the end of June 2025.
Following a nearly 50% decline against the dollar the previous year, the central bank fixed the value of the pound at 30.85 to the dollar in March.
Before the Israeli campaign against Hamas in Gaza started in October, the pound was worth 39 on the black market, but it is currently worth roughly 61 to the dollar.
December’s annual headline inflation rate of 33.7% was at an all-time high.
(Reuters)
