Egypt growth to accelerate to 5.5 per cent in 2018/19
Four tailwinds are expected to help the Egyptian economy recover in 2018, according to analysis conducted by Ziad Daoud, Chief Middle East Economist, Bloomberg Economics.
Daoud said that Egypt’s economy took a battering after the revolution of 2011, with annual growth declining to 3.1 per cent in 2011-16 from an average of 6.2 per cent in 2005-10. “As the bulk of the International Monetary Fund adjustments have already taken place, we expect growth to pick up this year.”
The four tailwinds Bloomberg Economics expects to aid growth in Egypt are:
- Declining inflation:
Inflation is expected to gradually decline to an average of 15 per cent in 2018/19, and within the central bank’s 10-16 per cent target range. This is due to the expected drop-out of exchange rate depreciations and the introduction of value-added tax from year-on-year calculations in 2018/19.
- Lower interest rates
As inflation moderates, the central bank should unwind some of its monetary tightening. Bloomberg Economics forecasts rates will be reduced by 400-500 basis points over the course of 2018. This should boost growth through faster expansion in consumption and investment.
- Tourism recovery
The number of tourists has picked up, climbing to nearly 780,000 per month in the first four months of the current fiscal year from about 550,000 per month in 2016/17. Tourists also appear to be staying longer -– the average number of nights almost doubled to 12 in July-October 2017 compared with the same period a year earlier. This is aided by an improved security set-up which has prompted many countries to resume flights to Egypt or announce intentions to do so.
- New gas production
Egypt has begun production from Zohr, a supergiant gas field. Production is expected to reach 1.7 billion cubic feet per day by June 2018 before rising to 2.7 billion cubic feet per day by the end of 2019. This could make Egypt self-sufficient in gas and may even help the country export it in the future.
“The story of Egypt is positive in the short term. However, most of the factors behind the expected recovery are temporary, and as these fade or reach their limit, Egypt will need to find new drivers for growth,” said Daoud.