The European Bank for Reconstruction and Development (EBRD) expected Egypt’s growth to pick up to 5.7% in fiscal year (FY) 2021/22, from the 4.9% that it projected in November, stabilising at 5% in FY 2022/23.
The EBRD Regional Economic Prospects (REP) report released on Tuesday on the sidelines of the EBRD’s 31 annual meeting, kicked off on Tuesday in Morocco, said that in Egypt, growth in the first half of FY 2021/22 averaged 9% year on year, driven by improvements in tourism, manufacturing, construction, wholesale and retail trade, and agriculture.
“The recovery is expected to continue, and growth is expected to pick up to 5.7% in fiscal 2021-22, stabilising at 5% in fiscal 2022/23, although rising prices for wheat, food products and petroleum due to the war on Ukraine will have an impact” according to the EBRD.
The report mentioned that Egypt is a net oil importer and one of the world’s biggest wheat importers, and it depends on imports for other food products as well, all of which are likely to face elevated prices in the short and medium term
On the upside, the EBRD said that higher demand and prices for Egypt’s gas exports could sustain growth in the medium term, and the IMF-supported programme could support reform implementation and investor confidence. It continued that the latter could also help manage external imbalances, as might recent EGP devaluation.
Notably, the Egyptian government is working with the IMF on designing a new loan-backed programme to support the Egyptian economy and address the ongoing challenges against the severe repercussions of the war in Ukraine on the globe.
The report also expected that on a calendar year basis, growth is forecast to slow down to 3.1% in 2022, from 7.2% in 2021, before picking up to 6% in 2023.
The report explained that downside risks to Egypt’s economic performance include the volatility in global energy and food prices and the possibility that a faltering global recovery spills over into key sectors and supply chains
Concerning the the southern and eastern Mediterranean (SEMED) region, the EBRD is projecting a slowdown in economic growth for the SEMED region in 2022, to 2.5%.
The forecast is largely in line with the Bank’s economic update of March 2022, which revised down its November forecast of 4.3% growth this year..
The EBRD said that the impact of the war on Ukraine on the SEMED region will primarily be felt through higher oil and food prices for consumers, as well as secondary effects on budgets, food security and medium-term growth drivers. All countries in the region depend on imported petroleum products, while several – including Egypt, Tunisia and Jordan – depend on imported food products as well.
“In addition, there is likely to be a negative impact on tourism in some SEMED countries, although new opportunities could arise in the area of renewable energy investments, given the countries’ potential in this regard,” the EBRD expected.
“Higher growth of 4.8% is forecast for 2023 as the recovery gathers pace in most countries and as economic and governance reforms in all countries advance and give a boost to the recovery,” EBRD forecasted.