2024-01-24 04:19:46
Egypt’s economic growth will be slower than expected due to a weakening pound, inflation that reduces purchasing power and fallout from the Gaza crisis that eats into the country’s main sources of foreign currency, according to a Archyde.com poll conducted on Wednesday.
Suez Canal revenues fell 40% in early January after maritime attacks by Yemen’s Houthis diverted ships. The crisis in the neighboring Gaza Strip, which began in October, has also weakened tourism prospects.
“Developments over the past month have seen the country hit hard from different angles and directly on its main revenue generators,” Pieter du Preez of Oxford Economics wrote in a client note this week.
Last week, global ratings agency Moody’s downgraded its outlook on Egypt’s sovereign debt from stable to negative.
A $3 billion financial support package from the International Monetary Fund (IMF) signed in December 2022 failed after Egypt paused on its promise to move to a flexible exchange rate regime and sell assets of State. An IMF team is currently holding discussions in Cairo on how to revive and possibly expand the program.
The median forecast in a Archyde.com poll of 14 economists is for gross domestic product (GDP) growth of 3.5% for the fiscal year that began July 1, down from previous forecasts for the same year 3.9% in October and 4.2% in July.
In 2024/25, growth will reach 4.15%, according to the latest survey, although this is lower than the 4.50% expected by analysts just three months ago.
Last month, the central bank estimated that the economy slowed to 2.9% in the second quarter of 2023, from 3.9% in the first quarter.
“Real GDP growth is expected to slow further in the 2023/24 fiscal year before gradually recovering thereafter,” the bank’s Monetary Policy Committee said in a Dec. 21 statement.
The poll’s median exchange forecast sees the Egyptian pound weakening to 40.00 per dollar by the end of June 2024 and to 43.00 by the end of June 2025.
The central bank has held the pound at 30.85 to the dollar since March, after letting it fall almost 50% against the dollar the previous year.
On the black market, the pound has fallen to around 61 to the dollar, from 39 before the start of Israel’s campaign against Hamas in Gaza in October.
The annual headline inflation rate, which stood at 33.7% in December, has reached record highs since June.
The median forecast for the current financial year called for inflation to average 30.80% before slowing to 18.22% in 2024/25.
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