Egypt’s growth is forecast to rebound to 4.2% in 2021 and 5.2% in 2022, according to a Regional Economic Prospects report issued this month by the European Bank for Reconstruction and Development (EBRD).
This compares to the 1.5% reported in 2020, when the country was among the few worldwide to have positive growth, the EBRD report added.
The report said that Egypt’s economic growth in the first three quarters of fiscal year (FY) 2020/21, covering the period from July 2020 to March 2021, averaged 1.9% year-on-year (y-o-y). This followed a slowdown in growth during FY 2019/20 to 3.6%.
The bank said that the growth was led by improvements in wholesale and retail trade, agriculture, telecommunications, and construction. At the same time, however, the sluggish manufacturing activity, coupled with weak tourism, slowed down the recovery.
The EBRD forecasts that the pace of recovery of gross domestic product (GDP) will decelerate to 2.5% growth in FY 2020/21, before picking up to 4.5% in FY 2021/22.
“The boom in the telecommunications sector will continue to sustain growth, whilst falling unemployment rates will support consumption, and private investment and [foreign direct investment] FDI flows will pick up,” the report said, “However, risks include a slow uptake of vaccination, the weak outlook in the tourism sector in view of a probable global delay in tourism recovery, as well as the slowing momentum of major projects implemented in different parts of the country.”
The EBRD is raising its economic growth forecast for the Southern and Eastern Mediterranean (SEMED) region to 3.5% in 2021, the report added.
The return to growth follows a 2.1% decline in GDP in 2020. However, the bank warns that the speed of recovery would vary from economy to economy, reflecting the slow recovery in tourism, mounting fiscal pressures, and political uncertainty across the region.
For 2022, the EBRD economists expect continued growth of 4.6%, provided the region’s economies are supported by structural reforms, a recovery in foreign investment and stronger trade flows.
EBRD Chief Economist Beata Javorcik said, “Although the revised forecasts give reasons to be optimistic, huge uncertainty remains with regards to the path of the novel coronavirus (COVID-19) Delta variant.”
Javorcik noted that this poses particularly large risks for countries that have made less progress on vaccinations and for economies highly reliant on international tourism.