ľ¹ÏÓ°Ôº

  1. Where We Work
  2. Egypt
publication

Egypt¡¯s Economic Outlook- April 2017

Egypt has embarked on a major economic reform program, including the liberalization of the exchange rate regime, fiscal consolidation measures and reforms to the business environment. The liberalization of the exchange rate regime is a key step towards restoring the competitiveness of the economy and boosting private sector activity, which had been severely impeded by shortages of foreign currency. Yet, the reforms are exacerbating social pressures in the short term, with inflation reaching some of the highest recorded rates.

The first quarter of FY17 (July to June) marked a slowdown in growth recording 3.4% compared to 5.1% in the same quarter last year, with annual growth in FY16 registering 4.3%. Growth was constrained by severe short-ages in hard currency, an overvalued ex-change rate and sluggish growth in Europe, Egypt¡¯s main trading partner.

GDP is expected to grow by 3.9% in FY17, and will be largely driven by public investment and to some extent net ex-ports. Private investment is expected to pick up only in the second half of FY17, supported by enhanced competitiveness following the depreciation of the currency and the gradual implementation of business climate reforms. Tourism is also expected to steadily recover on the back of a weaker currency. Yet, growth will likely be undermined by slower growth of private consumption, which is expected to be negatively affected by record high inflation rates. Prudent monetary policy is projected to bring inflation down over the forecast horizon after the one-off effects of depreciation, subsidy reforms, and the introduction of VAT dissipate.

RELATED