Despite the positive signs, the Egyptian economy remains in a highly critical position with challenges ahead, as inflation remains a primary concern, according to a report recently issued by Oxford Business Group (OBG).
“While exports have become more competitive following the flotation of the pound, inflation rates hit three-decade highs, with annual urban consumer price inflation jumping to 33% in July, the highest level since 1986,” OBG’s report said.
The International Monetary Fund (IMF) expects inflation to drop to just over 10% by the end of FY 2017/2018, as the developments increase import costs, putting a strain on many domestic consumers and businesses. The IMF has cited this as a potential challenge to the country’s economic stability, along with a lack of growth in trade partners, along with the political and social difficulty of implementing the planned reforms.
The Egyptian government, on the other hand, expects a 5-5.25% growth in GDP by the end of this fiscal year, and the IMF expects a slightly lower growth at 4.5%.
Regarding the economic reforms and their impact on the Egyptian economy, OBG said in its report that the IMF released a report in September stating that Egypt had made a “good start” to its $12bn loan deal, noting that the reforms had helped boost the growth.
The Egyptian authorities have embarked on an ambitious reform programme and have taken decisive measures aimed at restoring macroeconomic stability and sustainable public finances,” Subir Lall, IMF mission director in Egypt, said. “We have seen that economic activity has been gathering strength, and efforts at reining in the budget deficit have begun to bear fruit.”
OBG said that the deal with the IMF is related to a series of fiscal reforms from the government, which has prioritised reducing the deficit and attracting more foreign capital into the country.
