Egypt’s economy will slow sharply this year due to the coronavirus (COVID-19), but will avoid a recession, according to the latest forecast by the European Bank for Reconstruction and Development (EBRD) published on Wednesday.
The EBRD’s latest Regional Economic Prospects report sees Egypt’s 2020 growth in Egypt at 0.5%, compared with 5.6% in 2019. The report anticipates that the economy willl do a rebound to 5.2% in 2021.
The report said that the downturn led by the pandemic reflects a slowdown in the tourism sector, and disruptions in global value chains. It added that a slowdown in demand from trading partners and in foreign direct investment may also occur.
However, large public construction projects and the boom in the telecommunications sector have so far been factors supporting growth.
The main risks to the outlook arise from the need for a tougher lockdown if the spread of the coronavirus accelerates, and if there is a negative outlook in Egypt’s main trading partners.
In the EBRD’s southern and eastern Mediterranean region, the negative impacts of the coronavirus are expected to be seen in the tourism sector. Added to this, a decline in domestic demand due to containment measures is also expected, alongside a fall in demand from main trading partners and a slowdown in foreign direct investment (FDI).
On average, regional economies are expected to shrink by 0.8% in 2020 before rebounding with growth of 4.8% in 2021.
Economies across the EBRD regions may contract on average by 3.5% this year, with a rebound of 4.8% possible in 2021, the report said. It warned, however, that the projections are subject to “unprecedented uncertainty”.
Across the EBRD regions, containment measures have affected domestic demand and supply. External shocks include a sharp drop in commodity prices, weighing on commodity exporters, disruption to global value chains, a collapse in tourism and a drop in remittances.
The EBRD invests in emerging economies from central and Eastern Europe through to Central Asia and the Middle East and North Africa.