Egypt gained notable improvements in confidence, exports and manufacturing, according to the World Bank’s report in January , which highlighted 1.2% growth for 2014 in developing Middle East and North Africa countries.
The report, released every six months, however, added : “This modest upturn remains fragile, and output still languishes well below the region’s potential.”
The report highlighted the most prominent problems that need to be addressed by those countries, including unemployment, poverty and structural reforms.
Different variables, including domestic exchange rate and demand pressures as well as the rise in VAT, have caused inflation rates to rise in some countries including Egypt, the report added.
In October 2014, Egypt witnessed a 0.7% increase in inflation between September and October 2014, reaching 11.8%. Rates then declined in November to reach 8.5%, but then again jumped to reach 9.8% in December.
Economic activity has been recovering in oil-importing developing countries, the report added, where it also indicated that Egypt has been witnessing significant leap in industrial production. This was derived from better stability in the country and the “large-scale financial support from the GCC for investment programmes”.
The high interest in buying investment certificates for the Suez Canal project was part of the reason why Egypt witnessed stabilisation in 2014, the report said.
Suez Canal certificates were issued for sale to Egyptian citizens, and collected an amount of EGP 64bn in less than 14 days.
Other actions undertaken by Egypt in 2014 included increasing fuel and electricity prices to reform energy subsidies and as a step to reduce fiscal deficit, the report highlighted.
It further indicated that the increase of prices for the prior mentioned services along with revenue measures will aid in reducing “fiscal deficit from 14% of GDP in the fiscal year ending June 2013, to 11% of GDP in two years”.
The report expects that real GDP in Egypt will grow from 2.9% in 2014 to 3.6% in 2105. It is projected that GDP will rise further to reach 3.9% in 2016, and finally inch up slightly to 4.0% in 2017.
According to the report, other countries in the region that are witnessing a steady recovery after a period of uncertainty and turmoil are Jordan, Lebanon and Tunisia. The last two, however, are expected to see more recovery at a lower extent compared to Egypt and Jordan.
Meanwhile some countries in the region are anticipated to continue being negatively influenced by security hurdles, including Iraq, Libya and Yemen.
Several rating agencies have maintained a negative outlook of Egypt since the 25 January Revolution in 2011. The country’s economic outlook was downgraded by international agencies as Moody’s, Fitch and Standard and Poor’s.
The downgrades came about due to violence and political instability, which took a massive toll on investments and foreign reserves.
Things however took an upturn in late 2014 where rating agencies changed the country’s outlook from being negative to stable. Reasons behind this change was attributed to inflow of foreign currency funds to manage the country’s short-term fiscal and external financing needs from official donors and the phase out of fuel and electricity subsidies, as well as the balancing of economic risks.