Economic activity in Egypt will improve and imbalances will narrow further, said the World Bank (WB) in a statement released Monday, adding, “real GDP will grow by 5% in FY 2017/18, and gradually increase to 5.8% by FY 2019/20”.
The statement mentioned that the growth is expected to be driven by resilient private consumption and investment, in addition to a probability of a gradual pickup in exports, notably from the tourism and gas sectors.
The Ministry of Finance announced in April that it aims to achieve growth in GDP of 5.8% in FY 2018/19.
Furthermore, extreme poverty in Egypt is practically eradicated, whereby using the national poverty threshold, about a third (27.8%) of the population was below the poverty line in 2015. Moreover, the high inflation accumulated over the course of FY 2014/15 to FY 2016/17 has lowered the purchasing power of households across societal segments, reducing the positive spill overs of economic growth, and taking a toll on social and economic conditions.
Regional disparities continue to be part of the country’s landscape, with rural Upper Egypt showing poverty rates three times as high as metropolitan Egypt, said the statement.
The statement added that recent increases in allowances of the main social programmes have helped weather the effects of inflation, but imperfect coverage and targeting leave some groups unprotected.
Meanwhile, the WB said in its latest Middle East and North Africa Economic Monitor that economic growth in the MENA region is projected to rebound in 2018, thanks to a positive global outlook, oil prices stabilising at relatively higher levels, and stabilisation policies and reforms.
Growth in the MENA region is expected to rebound to 3.1% in 2018, following a sharp decline to 2% in 2017 from 4.3% in 2016, added the WB, noting that the increase in growth is broad-based and almost all countries will experience an uptick this year.
The WB said that the good performance by Gulf Cooperation Council countries will grow oil exporters by 3% in 2018, double their rate in 2017.
“There are grounds for optimism,” said Hafez Ghanem, WB vice president for the Middle East and North Africa region, adding, “now is the time to focus on creating more jobs and economic opportunities for youth. The positive outlook is an opportunity to speed up reforms for a renewed private sector as an engine of growth and job creation.”
Geopolitical tensions, the challenges posed by the forcible displacement of people, including refugees, and the rising level of debt in the region could cloud the positive outlook, added the statement.
“While stabilisation policies have helped economies adjust in recent years,” the report said, “a second phase of reforms is needed that should be transformative if the region is to reach its potential. Indeed, the current growth trajectory is markedly below that potential and insufficient to absorb the hundreds of millions of young people who will enter the labour market in the coming decades. In this report, we explore the role that public-private partnerships can play, not only in providing an alternative source of financing, but in helping change the role of the state from the main provider of employment to an enabler of private sector activity.”
“Studies have shown that the gap between MENA economies and fast-growing ones is the performance of the services sector,” the report continued. “Rapid technological change offers new opportunities for boosting private-sector-led growth through enhancement of high-tech jobs in the services sector. For each job created in the high-tech sector, approximately 4.3 jobs are created across all occupations and income groups. The MENA region has a fast-growing pool of university graduates, a heavy penetration of social media, and smartphones. Combining them could serve as the foundation for a digital sector that could create much-needed private sector jobs for the youth over the next decade. Several MENA countries have developed strategies to transform their economies and take advantage of disruptive technology, but more is needed to capture the opportunity.”
The report also shows how external forces are disrupting various markets, including those for energy, which exposes MENA countries to new risks, including of stranded assets.