Economists cut Egypt growth forecast for year to June to 2.8%: Reuters poll

Annual inflation came in at 5.4% in December, up from 3.4% in August, when it approached its lowest level in 14 years

  
City At Waterfront During Sunset Photo Taken In Al Jizah, Egypt. Image used for illustrative purpose.

City At Waterfront During Sunset Photo Taken In Al Jizah, Egypt. Image used for illustrative purpose.

Getty Images/ Mohamed Aboelkasem / EyeEm

CAIRO  - The Egyptian economy will grow 2.8% in the fiscal year that ends in June, a Reuters poll of 20 economists showed on Tuesday, slower than the 3.3% forecast three months earlier.

October's consensus forecast was already significantly lower than the almost 6% growth projected before the coronavirus pandemic broke out. The government said in November it expected growth of 3.3% this fiscal year. 

The International Monetary Fund this month predicted growth of 2.8%.  

"Weak tourism receipts expected over FY2020/21 are the main drag on the economy in our view," said HC Securities analyst Monette Doss.

The pandemic caused tourism to collapse and other parts of the economy to slow. Only 3 million tourists visited the country in 2020, a mere 23% of the number for 2019, Deputy Tourism Minister Ghada Shalabi said last month.  

In the Jan. 11-25 poll, economists predicted growth would recover to 5.0% in 2021/22 and to 5.4% in 2022/23.

"We expect local private investments encouraged by monetary easing together with planned government spending to support economic growth," Doss said.

Since the pandemic, the government has secured about $20 billion in external financing to plug a balance of payments gap caused by the collapse in tourism, including nearly $8 billion from the International Monetary Fund.

The economists polled by Reuters expected annual urban consumer price inflation to slow to 5.6% in 2020/21 before gathering pace to 7.0% in each of 2021/22 and 2022/23.

Annual inflation came in at 5.4% in December, up from 3.4% in August, when it approached its lowest level in 14 years.

The currency will weaken to 16.11 Egyptian pounds per dollar by the end of 2021 and 16.63 by end-2022 from 15.69 at the end of 2020, the median forecasts showed.

The central bank is expected to cut its overnight lending rate to 8.25% by the end of June 2021 from the current 9.25%, the poll found. It would remain at 8.25% in June 2022 but rise to 8.50% by June 2023.

(Reporting by Patrick Werr in Cairo; Polling by Md Manzer Hussain and Shaloo Shrivastava in Bengaluru; Editing by Hugh Lawson) ((patrick.werr@thomsonreuters.com;))

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