[CAVIE-ACCI] Egypt’s economy is expected to be the only economy in the Middle East North Africa (MENA) region to experience positive growth in GDP this year and one of the few countries not to enter a recession amid the global economic fallout during the COVID-19 pandemic.
The assessment was made in a report on Egypt’s response to the pandemic released on Tuesday by Oxford Business Group (OBG) in collaboration with Commercial International Bank (CIB), the largest private sector bank in Egypt.
According to the findings, the government had been credited with adopting structural reforms which have been backed by a $12 billion IMF loan released over five tranches, that last of which was in May last year and an additional $1.67 billion in covid related financial support.
Although Egypt’s economy like others has been disrupted by the pandemic, it has also presented a number of new opportunities, including the rise of e-commerce and digital banking, and the potential for a global shift of manufacturing operations out of China. In the banking sector, the report predicted that lower interest rates will likely become the more common place, which will improve the lending environment.
Prior to the outbreak of COVID-19 earlier in the year, Egypt had one of the best-performing economies in the region. In April the Ministry of Finance downgraded Egypt’s growth forecast for the fiscal year of 2020/21 from 4.5 per cent to 3.5 per cent. This was further reduced to two per cent a month later, nevertheless it represents one of the highest growth rates in the world this year. Neighbouring Israel has seen its GDP contract by 4.25 per cent amid a rise in unemployment and insolvencies as it prepares for a third national lockdown.
Earlier this month, Egypt’s Minister of Finance Mohamed Maait said that the country’s economy is set to continue its positive growth over the next two fiscal years, with the economy expanding between 2.8 and four per cent and is forecasted to increase by between 5.5. and 6.5 per cent the following fiscal year.
“Without economic reform, there would not be any hard currency to buy medicines and medical supplies, and import petroleum materials,” he said.
In spite of the growth, Egypt’s poverty rates have continued to grow, with more than a third of the population said to be living in poverty.
Since Abdel Fattah Al-Sisi became president in 2014 Egyptians have lived through a severe economic crisis. Under the conditions of a 2016 IMF loan austerity measures have been rolled out across the country and in particular fuel and electricity hikes have hit the population hard and have not been offset by an increase in salaries.
Egypt’s auditing body, the Central Agency for Public Mobilisation and Statistics (CAPMAS), has said that the average household expenditure has increased from 36,000 Egyptian pounds ($2,174) to 51,000 Egyptian pounds ($3,079) annually.
A key requirement of the IMF loan was to float the Egyptian pound, which it did in 2016. Afterwards the country suffered a wave of price increases and inflation at 33 per cent.
Al-Sisi has called on Egyptians to be more tolerant and patient until the economy improves, saying he had “no choice” but to implement the programme.