Egypt’s Economy Tops Recovery Rates during the Pandemic

Egypt’s economy is set to recover through GDP growth and rise by 5% for the financial year 2021-2022, predicted Fitch Ratings. Egypt is on top of Middle East and North Africa countries that have achieved recovery to pre-pandemic rates.

The Egyptian economy is expected to be one of the few economies worldwide to witness positive growth during the Covdi-19 pandemic as it continues to exceed its pre-pandemic levels. The International Monetary Fund predicted GDP growth of 2.5% for Egypt in 2021, reaching 5.7% in 2022, compared to 3.6% in 2020.

The IMF also expects the inflation rate to drop to 4.8% in 2021, from 5.7% in 2020.

Egypt’s Economy in Fitch Ratings View

‘In our view, minimal currency volatility in 2020 reflects a degree of intervention from the Central Bank of Egypt as well as public sector banks making foreign exchange available at the prevailing exchange rate, at the cost of part of their net foreign assets. Continued exchange rate rigidity poses risks to macroeconomic stability and current account performance in the medium term, although it has supported non-resident inflows into the Egyptian pound government bond market,’ the Fitch Ratings report stated.

As for external funding, the report said, ‘Egypt’s external funding conditions have remained broadly favourable. The government has issued about EGP72bn ($4.6bn) in external bonds in Financial Year 2021, following EGP78.4bn ($5bn) in FY20. About EGP51.7bn ($3.3bn) remains to be disbursed under the EGP81.5bn ($5.2bn) Stand-By Arrangement (SBA) agreed in June last year, including the EGP26.6bn ($1.7bn) disbursement approved by the IMF in December.’

‘In FY20, Egypt also received EGP26.6bn ($2.8bn) through the IMF’s Rapid Financing Instrument. Net Foreign Direct Investments remained relatively resilient at EGP111.3bn ($7.1bn) in FY20, and we forecast EGP86.2bn ($5.5bn) for FY21.’

According to the report, Egypt’s economy has outperformed the vast majority of Fitch-rated sovereigns over the past year due to a low incidence of coronavirus cases and deaths, allowing for a measured public health response and supported resilient domestic demand, even as tourism and other export-oriented sectors sagged.