The International Monetary Fund (IMF) has revealed that it sees the Egyptian economy rebounding in the next fiscal year (FY) supported by the rollout of vaccines against the novel coronavirus (COVID-19) pandemic.
The rebound will also be driven by the government’s public investment, according to Taline Koranchelian, Deputy Director at the IMF’s Middle East and Central Asia Department.
The IMF released its world economic outlook for April, on Tuesday, as part of its and the World Bank’s Spring Meetings.
It noted that it expects the Egyptian economy to continue its positive growth in FY 2020/21, recording 2.5%, though down from its projection in October’s world economic outlook (WEO) of 2.8%.
It mentioned that the Egyptian economy will rebound in FYs 2021/22 and 2025/26, to record 5.7% and 5.8% growth, respectively, compared to 3.6% in FY 2019/20.
During a virtual press conference held by the IMF on Tuesday, Daily News Egypt asked why did the IMF modify its growth projection for Egypt in FY 2020/21, and what are the factors that would lead to the FY 2021/22 rebound?
Koranchelian said that Egypt has done well in terms of containing the economic and fallout of the COVID-19 pandemic, and it was one of the few countries to have not seen a negative contraction in its GDP last year.
“This year our projection for growth is 2.5%. We have done some revisions, which reflect downside risks to domestic demand,” Koranchelian said, “This is because we have seen some softness, more recently, and also tourism has been recovering, but the receipts are still lower than before which is also an important factor in growth.”
She added that the factors that will help the country to rebound again in FY 2021/22 are the rollout of COVID-19 vaccines and the government’s public investment.
She said that, in terms of policies, it is very important that the immediate priority is to maintain and to support the recovery, and this should be balanced in the context of Egypt. This is particularly given the high public debt and authorities are cognizant of this, and, and they are targeted support to economy.
“More importantly, now that the big part of the crisis is over, I think it is very important that the structural reform agenda is accelerated,” Koranchelian said, “And there, I think it is very important to improve a governance and the business environment, and remove trade barriers in continue to enhance the transparency of state owned enterprises, but also reduce gradually the state footprint, and provide equal opportunities to all agents.”
She noted that Egypt has a large youth population, and it needs to provide opportunities and to create the jobs for its youth, and also for its female population.
Meanwhile, Egypt’s Minister of Planning and Economic Development Hala El-Said announced earlier that the Egyptian Government is pursuing the second phase of its reform programme.
This includes: implementing structural reforms targeting the formal sector to encourage inclusive growth; creating new job opportunities; diversifying and developing production patterns; and improving Egypt’s business climate, among other areas.
Minister of International Cooperation Rania Al-Mashat told Daily News Egypt earlier in an interview, that private sector engagement and green recovery will be a key theme in 2021.
“Reform is a continuous process,” Minister Al-Mashat said, “Egypt will continue to expand on reforms, whether fiscal or monetary, which create a conducive environment to attract FDIs and ODA, and this will help us navigate through troubled waters going forward.”
Answering a question , if Egypt would sign another financing agreement with the IMF after the end of the existing programme.Koranchelian said, “We are still in the Stand-By Arrangement (SBA) programme with Egypt. The second review is programmed for May and June, and we will also have an article for consultation at that time.”
“Now, this [review] mission will provide us with the opportunity to take stock, and also to discuss the reform programme, going forward, so I would say, we will need to focus at this period, on the article for consultation,” she concluded.
Last June, Egypt had agreed with the IMF on a 12-month SBA facility worth $5.2bn, from which Egypt obtained $3.6bn. The remaining $1.6bn Egypt will get after passing the second review.