Egyptian economic growth will be slower than previously expected as its pound weakens, inflation cuts into purchasing power and fallout from the Gaza crisis eats into the country’s main sources of foreign currency, a Reuters poll showed on Wednesday.
Revenue from the Suez Canal fell 40% in early January after sea attacks by Yemen’s Houthis diverted away shipping. The crisis in neighbouring Gaza that started in October has also weakened the tourism outlook.
“Developments over the past month have seen the country being hit hard from various angles and directly to its main revenue generators,” Pieter du Preez of Oxford Economics wrote in a client note this week.
Global credit-ratings agency Moody’s last week downgraded its outlook on Egypt’s sovereign debt to negative from stable.
A $3 billion financial support package from the International Monetary Fund (IMF) signed in December 2022 faltered after Egypt paused on its pledge to move to a flexible exchange rate regime and sell state assets. An IMF team is now holding talks in Cairo on how to revive and possibly expand the package.
The median forecast in a Reuters poll of 14 economists was for gross domestic product (GDP) growth of 3.5% in the fiscal year that began on July 1, down from a previous forecast for the same year of 3.9% in October and 4.2% in July.
In 2024/25, growth will climb to 4.15%, the latest poll showed, although this is lower than the 4.50% expected by analysts just three months ago.
The central bank last month estimated the economy had slowed to 2.9% in the second quarter of 2023 from 3.9% in the first quarter.
“Real GDP growth is expected to slow down further during fiscal year 2023/24 before gradually picking up thereafter,” the bank’s Monetary Policy Committee said in a December 21 statement.
The poll’s median currency forecast was for the Egyptian pound to weaken to 40.00 to the dollar by end-June 2024 and 43.00 by end-June 2025.
