Reuters – Egypt’s economy will only grow by 2.0% in the fiscal year ending June 2014, well below the government target of 3.5%, according to a Reuters poll of economists who lowered their forecasts once again.
Chances for an economic rebound were hurt by violence and political turmoil after Islamist President Mohamed Morsi was ousted by the army on July 3 after mass protests against him.
The consensus of 10 economists polled by Reuters for 2.0% growth in the fiscal year to the end of June 2014 is down sharply from 2.6% in a poll conducted in September.
The survey suggested growth would accelerate to 3.3% in the year to June 2015, also well behind the government’s 4.5% target.
Egypt’s economy grew a meagre 2.1% in the year to end-June 2013.
“In Egypt, pressures on the external position eased in 2013,” said Daniel Kaye at National Bank of Kuwait.
“Along with a slight improvement in the political climate, this has set the stage for a modest acceleration in growth in FY14/15.”
Supported by more than $12 billion in Gulf aid, Egypt introduced an EGP 30bn ($4.3bn) stimulus package in 2013 and plans to launch another one of about the same size later this month.
However, political turmoil also made it less likely the government would make early cuts in energy subsidies, which make up 20% of state spending, preventing it from directing resources to investment.
Before the 2011 uprising that toppled autocrat President Hosni Mubarak, the economy grew at about 6-7% annually for several years.
Even that pace was barely enough to produce work for the number of Egyptian youths entering the job market.
Three years of political uncertainty and protests have hit Egypt’s tourism industry, traditionally one of the country’s biggest source of foreign currency.
Protests in late 2012 sparked a run on the currency that cost the central bank billions of dollars to bring under control.
On Monday, the central bank announced an exceptional auction to sell $1.5bn.
The latest poll forecast that the Egyptian pound would weaken to 6.99 to the dollar by end-June and to 7.29 by end-June 2015.
On Monday, the pound was trading at 6.96 to the dollar officially in a bureau de change in Cairo and at 7.37 on the black market, according to a trader.
The poll predicted that inflation would reach 9.5%, both in 2013/14 and the following fiscal year, slightly lower than forecasts of 9.6 and 9.8% in the last survey.
Urban inflation stood at 11.7% in the year to December 2013, up from 9.5% a year earlier.
It reached 13% in November 2013.