Egypt's economic growth to pick up slightly this fiscal year: Poll

Newspaper Title: www.reuters.com

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Thursday - 20 July 2017

CAIRO (Reuters) - Egypt’s economy is expected to grow by 4 percent in the fiscal year that has just began, a Reuters poll showed, in line with government forecasts, before picking up to 4.3 percent in 2018/2019.

Earlier this week, Planning Minister Hala al-Saeed told a news conference that the GDP growth rate for the 2016/2017 fiscal year which ended in June would not fall below 4 percent.

Egypt’s economy has struggled since a 2011 uprising that scared off tourists and foreign investors. Foreign reserves have dried up and President Abdel Fattah al-Sisi is under pressure to make difficult economic reforms aimed at reviving the economy that may prove hard to balance with public maintaining support.

Before 2011, the economy was growing by about 7 percent annually. Egypt is hoping a $12 billion three-year International Monetary Fund program it began last year, which includes subsidy cuts and tax hikes, will put the economy back on track.

The poll’s median forecast for annual core inflation was 17.2 percent for the current fiscal year, up from a previous forecast of 13.0 percent. It is predicted to drop to 12.2 percent in the 2018/2019 fiscal year.

Inflation has surged since the central bank floated the currency in November as part of the IMF deal, reaching 31.95 percent in June.

“Further inflationary pressures are expected in the coming months due to the increase in the fuel prices ... and higher electricity prices,” said Nadene Johnson, economist at NKC.

Egypt raised fuel prices by up to 50 percent last month and electricity prices by up to 42 percent earlier this month, in an effort to cut the budget deficit.

Since floating the Egyptian pound in November, it has also raised key interest rates by 700 basis points in a bid to curb inflation.

Economists, however, saw these rates coming back down. They forecast the overnight lending rate to drop to 16.50 percent by the end of this fiscal year from 19.75 currently. The rate is forecast to end the following fiscal year at 13.50 percent.