The International Monetary Fund on Thursday confirmed its Egypt’s economic growth forecast of 5.9 percent this financial year and 6 percent in 2020/2021.
In its fifth and final review of the performance of the Egyptian economy, the Fund edged down its 2019/2020 forecast for consumer price inflation to 9.6 percent from 10.7 percent. It also predicted an easing to 7.4 percent in 2020/2021.
Public debt was projected to fall to 70 percent of GDP by 2022/23 buoyed by the government’s new debt management strategy based on a continuation of primary surpluses of 2 percent of GDP.
“The decline in public debt is clearly one of the most dramatic for any country (excluding cases of debt restructuring). After reaching 103 percent of GDP in June 2017, government debt-to-GDP declined to 85 percent of GDP by June 2019, a decline of 18 percentage points within two years.” IMF’s review read.
“Moreover, the authorities’ new debt management strategy, based on a continuation of primary surpluses of 2 percent of GDP, aims to extend maturities and further reduce debt to 70 percent of GDP by FY23.”
The fund said Egypt’s financial market conditions had recovered in 2019 despite continued risks to the global outlook from escalating trade tensions.
“Portfolio inflows have resumed in 2019 as investor sentiment toward Egypt improved, supporting an appreciation of the Egyptian pound against the U.S. dollar of about 8 percent since the beginning of the year.”
Egypt’s macroeconomic situation has improved markedly since the start of the programme in 2016, IMF said. Critical macroeconomic reforms implemented by the authorities to correct significant external and domestic imbalances have been successful in achieving macroeconomic stabilisation, the Fund added.
“Growth has accelerated; external and fiscal deficits have narrowed; international reserves have increased; and public debt has been put on a firmly downward trajectory.
“Unemployment has declined to its lowest level in over a decade, while social protection was strengthened to ease the burden of adjustment on the poor.”
The near-term outlook remains favourable, IMF said, but sustained reform implementation would be essential to sustain strong growth and manage external risks.
“A more inclusive private sector and export-led growth model is needed to absorb the significant new entrants to the labour force expected over the next five years.”
“Strong medium-term growth projected in the baseline assumes sustained implementation of structural reforms to support private investment and foster broad-based growth beyond tourism and energy. A loss of reform momentum would reduce growth and potential output and put pressure on unemployment, given the fast-increasing labour force.”
The overall deficit of the budget sector is expected to reach 8.2 percent of GDP this financial year, beating the budget target of 8.4 percent of GDP.
Egypt is at the end of a three-year economic reform programme tied to a $12 billion loan from the IMF, which has been disbursed in full.
