The World Bank expects the Egyptian economy to grow by 6.1% in fiscal year (FY) 2021/22, raising its previous forecast in January by 0.6%, according to Global Economic Prospect June 2022.
The report said that Egypt’s growth slowed in early 2022 following a boom in the first half of the fiscal year. Export revenues in March soared about 80% above pre-pandemic highs.
“In Egypt, stronger-than-expected activity for the first half of the fiscal year, only partly offset by repercussions from the war in Ukraine, saw growth revised up to 6.1% in FY2021/22. Growth is expected to moderate to 4.8% in FY2022/23, a 0.7% downgrade, as rising food and energy inflation slows income growth and raises input costs in key sectors, and tourism flows moderate,” the report read.
Growth in Egypt will still be supported by the gas extractives sector, as it benefits from elevated prices, by remittances from the GCC, and by continued reform momentum, according to the report.
The World Bank highlighted that growth in the region is expected to firm to 5.3% in 2022, assisted by rising oil revenues, structural reforms in some economies namely Egypt, Saudi Arabia, United Arab Emirates, and a general warning of the pandemic’s adverse impacts.
Output in oil importers is expected to grow by 4.1% in 2022, a 0.5% downward revision, before accelerating to 4.4% in 2023. These headline numbers reflect highly fragile recoveries and the impact of an acceleration in the Arab Republic of Egypt, where stronger-than-expected activity for the first half of the fiscal year saw growth revised up to 6.1% in FY2021/22. Growth is expected to moderate to 4.8% in FY2022/23, a 0.7 percentage point downgrade, as a decline in tourism as a result of the Ukraine war and rising food and energy inflation dampens domestic demand and squeezes the budget.
At the turn of the year, the Middle East and North Africa (MNA) region was already struggling to make inroads on the lost growth and jobs due to COVID-19. The pandemic had come on top of a lost decade for many people of the region, due to compounded crises of political instability and conflict. For Lebanon, the port explosion and debt crisis added to the misery. Yet the much-needed growth was sapped by Omicron outbreaks and the spillover from withdrawal of policy support in advanced economies, on which the region depends heavily for tourism and trade. This difficult backdrop was followed by the Russian Federation’s invasion of Ukraine; however, its economic impact on the region has been mixed, with a net benefit to oil exporters but a double blow of higher food and fuel prices for oil importers. Households – especially the most disadvantaged – are hard hit: the median annual consumer inflation is at its highest level since the great recession of 2009 and at almost double the rate of increase seen in the decade prior to the pandemic.