Fitch Solutions has on Thursday downgraded its projections for Egypt’s real GDP growth to 4.9 percent for the financial year 2022/2023, which starts on July 1, from 5.5 percent forecast made earlier.
In its monthly updated report on the Middle East and North Africa’s (MENA) outlook, Fitch attributed its lower projections to the impacts of the Russian-Ukrainian conflict. This conflict will affect Egypt in terms of the higher commodity prices, disruptions to wheat supply, lower tourist inflows, and increased risk aversion towards emerging markets, Fitch report read.
This makes Fitch the only global financial institution to downgrade Egypt’s growth forecasts since the outbreak of the Russian war in Ukraine.
“Soaring inflation and monetary tightening will weigh on private consumption, while a rising subsidy bill and debt servicing costs will force reductions in capital expenditure,” the report said.
The report also expected Egypt’s external position to remain weak as the Russian war fuels the heightened risk aversion towards emerging markets, which will likely make the return of portfolio flows more challenging.
This is despite the anticipated deal between Egypt and the International Monetary Fund (IMF) as well as the GCC’s support to address the severe impacts of the war in Ukraine, added the report.
To date, the UAE, Saudi Arabia, and Qatar have backed the Egyptian economy with $22 billion to deal with the ongoing economic challenges.
In addition, a number of UAE firms and the Abu Dhabi Sovereign Wealth Fund (ADQ) had earlier announced that they will expand their investments across several sectors in Egypt, mainly real estate and education.
“Given this backdrop, we believe that authorities will increase their efforts to secure bilateral and multilateral funding while attracting foreign investment to cover the country’s external financing needs,” the report read.
As a result of the Russian War, the Egyptian government lowered its projections for the country’s real GDP growth to 5.5 percent, down from the 5.7 percent it expected previously.
Real GDP growth is projected to record 6.4 percent by the end of financial year 2021/22 given the country’s gradual economic recovery from the pandemic, according to the financial year 2022/23 budget plan.
