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|17 October, 2018

Egypt's economy to grow 5.3% in fiscal 2018-19: Poll

Positive effects of the reform programme on investment and export levels

Image used for illustrative purpose. Spectacular view of Cairo: river Nile, Hilton, Opera, museum of modern Egyptian art, Sheraton, Gezira.

Image used for illustrative purpose. Spectacular view of Cairo: river Nile, Hilton, Opera, museum of modern Egyptian art, Sheraton, Gezira.

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By Lena Masri

CAIRO- Egypt's economy will expand 5.3 percent in the fiscal year that began in July, a Reuters poll of 15 economists showed, as tourism recovers and the outlook for investment improves.

That median forecast was up slightly from 5.2 percent predicted in the previous poll in July but below a government target of 5.8 percent.

The economists' median growth forecast for the year starting next July was 5.5 percent.

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"The economy will continue to capitalise on the reform programme, with activity supported in particular by an ongoing tourism recovery and investment prospects," said Maya Senussi, senior economist for the Middle East at Oxford Economics.

"That said, the private sector remains under pressure, not least due to high borrowing costs. These are unlikely to come down any time soon given the domestic inflation environment and external risks."

Reforms imposed under a 2016 austerity plan tied to a $12 billion International Monetary Fund loan programme have helped revive economic growth in the Arab world's most populous country after years of turmoil following a 2011 popular uprising.

Nadene Johnson, an economist at South Africa-based NKC African Economics, said the expected expansion was predicated on recovering consumer demand, strong growth in infrastructure and higher capital spending.

"The positive effects of the reform programme on investment and export levels, as well as the development of the natural gas sector, present upside potential for Egypt's economic growth prospects," she added.

The Reuters poll foresaw annual urban consumer price inflation of 14.9 percent for the current fiscal year, up from a previous forecast of 14.2 percent.

"Ongoing energy subsidy reforms, coupled with rising global oil prices, will weigh further on the domestic price environment," said Johnson.

Millions of Egyptians live below the poverty line and struggle to meet their basic needs after successive price increases for vegetables, fruit, fuel and medicine.

The economists polled expected inflation to ease to 12 percent in the fiscal year beginning next July. The annual urban consumer inflation rate rose to 16 percent in September from 14.24 percent in August, according to official statistics agency CAPMAS.

The median overnight lending rate predicted by six economists was 17 percent in the current fiscal year.

(Polling by Khushboo Mittal and Anisha Sheth; Writing by Lena Masri; Editing by Sami Aboudi) ((Lena.Masri@thomsonreuters.com;))