The International Monetary Fund (IMF) reduced its forecast for Egypt’s economic growth during the current fiscal year to 4.4% in its latest economic outlook released on Tuesday, compared to the 4.8% that was projected in July and 5% in April.
Petya Koeva Brooks — Deputy Director of the Research Department — explained in a press conference that Egypt, like many other countries, has been affected by the global slowdown and tightening financial conditions.
“It’s also a country that has experienced large capital outflows. So, in that context, with the heightened inflation, the measures to hike interest rates and to tackle inflation, we think are appropriate,” she said.
“In terms of the growth forecasts. We have downgraded our forecast for 2023 to 4.4%, and there are risks, of course, on the downside related to tightening financial conditions, as well as the broader challenges that come from the worsening external environment,” she continued.
However, the IMF forecasted Egypt’s growth to record 6.6% during the last FY, compared to the 5.9% that it was projecting in July and April.
Minister of Planning and Economic Development Hala El-Said announced last August that the Egyptian economy achieved a growth of 6.6% during the last FY, compared to about 3.3% in FY2020/21.
In terms of global growth, the IMF said that it will slow down from 2021’s 6% to 3.2% in 2022 and 2.7% in 2023.
The IMF maintained its 3.2% projection for 2022 in this report, however, for 2023, it reduced its forecast to 2.7% instead of the 2.9% projected in July
The latest report explained that the global economy is experiencing a number of turbulent challenges. Inflation higher than seen in several decades, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook.
“Normalisation of monetary and fiscal policies that delivered unprecedented support during the pandemic is cooling demand as policymakers aim to lower inflation back to target. But a growing share of economies are in a growth slowdown or outright contraction. The global economy’s future health rests critically on the successful calibration of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply-side disruptions, for example, in China,” the report mentioned.
According to the IMF, this is the weakest growth profile since 2001 — excluding the global financial crisis and the acute phase of the COVID-19 pandemic — and reflects significant slowdowns for the largest economies: A US GDP contraction in the first half (1H) of 2022, a euro area contraction in 2H 2022, and prolonged COVID-19 outbreaks and lockdowns in China with a growing property sector crisis. About a third of the world economy faces two consecutive quarters of negative growth.
Meanwhile, global inflation is expected to rise from 4.7% in 2021 to 8.8% in 2022 and then decline to 6.5% in 2023 and to 4.1% by 2024. Upside inflation surprises have been most widespread among advanced economies, with greater variability in emerging market and developing economies.