The global economy has been struggling with multiple crises for more than two years, ranging from the Corona epidemic to inflationary pressures and the war between Russia and Ukraine, and these repercussions are reflected on the Egyptian economy.
The repercussions of the current crises in the economy became evident in the supply chain crisis and the rise in shipping costs, which prompted many central banks around the world, led by the Federal Reserve, to raise interest rates.
CNBC Arabia conducted a survey with 10 major investors and manufacturers in Egypt regarding their expectations for the course of the Egyptian economy for the next fiscal year 2022/2023.
According to the results of the survey, there are expectations of increasing inflationary pressures on purchasing power and private sector activities for the fiscal year that begins next month.
Investment risks… and contraction in expansion operations
The opinions of the participants differed regarding the risks of investing in the current conditions. As 60% of them – 6 respondents to the survey – saw the high risks due to the ambiguity of the scene and the severity of geopolitical tensions.
While 30% indicated that the risks are stable without change, they see that the current conditions are the worst, while one person expects the risks to decrease during the next stage.
5 investors suggested a contraction in the expansion operations of the private sector, while 4 of them expressed their optimism to increase the sector’s investments for the next fiscal year, while one participant expected the stability of investment activities compared to their current situation.
The Egyptian private sector continued its contraction for the 18th consecutive month, as the PMI data revealed that production and orders in Egypt recorded a level of less than 50 points – the readers below 50 points indicate a contraction of the economy, while the reading above 50 points indicates its growth – during May, which indicates ” Sharp decline” in business activity and demand.
Optimism regarding the Egyptian government’s participation in the private sector
While the Egyptian government is preparing to strengthen the partnership with the private sector over the next few years, most representatives of the business community favored the success of the plan, as 6 investors expected to increase the private sector’s contribution to economic activity to more than 30% during the next fiscal year.
While two of the participants saw a decline in the private sector’s share of economic activity in Egypt, and two others suggested its stability at 30%.
The government aims to reach this percentage to 65% over the next three years.
Mixed expectations for the growth of the Egyptian economy
Six participants in the survey expected the Egyptian economy to register a growth of more than 4% for the next fiscal year, while one participant believed that growth would be less than this percentage, while three participants expressed more optimistic expectations, noting that the economy may record growth exceeding the 5% barrier.
Egypt is targeting an economic growth of 6.2% during the current fiscal year, and regarding 5.7% for the next fiscal year 2022/2023.
Expectations of a decline in consumption rates
Most of the respondents to the CNBC Arabia survey – 70 percent – expected a decline in consumption rates and purchasing power, as a result of price hikes and an increase in inflation rates.
While only two saw the increase in consumers’ move towards increased purchase, while only one saw the stability of the current rates.
Inflation in Egypt is currently at its highest level in 40 months, recording 13.1% in Egyptian cities, and 14.9% in the entire republic.
Hopes that the war will end by the end of 2022
Eight investors expressed their optimism that the Russian-Ukrainian war would end by the end of 2022, given the challenges it posed that caused the freezing of many projects and expansions of some of their businesses, while two participants expected the current war to end in 2023.
Split over interest rate path
Five investors who were included in the survey expected the interest rate in Egypt to rise further over the next year, while 4 expected it to decrease, while only one saw interest rates remaining stable at the current situation.
The Central Bank of Egypt raised interest rates at its last meeting, bringing the total number of interest rate hikes to 300 basis points since the beginning of the year until now, in addition to liberalizing the exchange rate and devaluing the pound by more than 18%.
Gold is the best safe haven for investment
Regarding the safe havens advised by the investors participating in the survey, gold gained 4 votes out of a total of 10, while 3 of them recommended investing in real estate, and two preferred certificates and bank deposits, but one investor recommended investing in the agricultural sector.
Optimistic forecasts for Egyptian exports
Six investors expected an increase in Egyptian exports for the current year, but 3 of them saw their stability at last year’s levels, while only one suggested their decline.
The Egyptian government aims to reach $100 billion in exports for the next five years, following recording $32.340 billion for 2021.
