Egypt’s GDP will expand 2.5% in fiscal year (FY) 2020/21, reflecting a 0.4 percentage point decline from last month’s forecast, according to the FocusEconomics Consensus Forecast report for August.
The report also expected that Egypt’s GDP will stabilise at 5.5% in FY 2021/22, following a period of instability brought on by the novel coronavirus (COVID-19) pandemic.
The report also indicated that inflation accelerated to 5.6% in June from 4.7% in May. The latest figures show a move closer to the Central Bank of Egypt (CBE) target range of 6-12% for the fourth quarter (Q4) of calendar year (CY) 2020.
Going forward, inflation should remain suppressed due to weak demand and lower oil prices. Lower electricity subsidies from July and reduced interest rates will, however, stoke upward pressure.
FocusEconomics notes that inflation will average 5.9% in CY 2020, down 0.4 percentage points from last month’s forecast, with inflation to stand at 7.3% in CY 2021.
On 25 June, the CBE left the overnight deposit, overnight lending, and main operation rates unchanged at 9.25%, 10.25%, and 9.75%, respectively. The next monetary policy meeting is scheduled for 13 August. Interest rates are likely to remain low going forward as the CBE aims to support economic growth and inflation.
FocusEconomics panellists projected the overnight deposit rate to end CY 2020 at 9.25% and CY 2021 at 9.04%. On 31 July, the Egyptian pound traded at EGP 15.97 per US dollar, appreciating 1.1% compared to the same day a month earlier. This is likely due in part to an improved coronavirus case trend in recent weeks and greater capital inflows across Egypt.
The report estimated that the Egyptian pound will end CY 2020 at EGP 16.51 per US dollar and CY 2021 at EGP 16.80 per US dollar.
The panellists have also forecast that public debt will reach 98.3% of GDP in FY 2021, and 100.2% in FY 2022.
FocusEconomics expects that Egypt’s unemployment rate will drop to 9.7% of the population in FY 2021, down from the 10.2% in FY 2020.
