Dcode Economic and Financial Consulting (Dcode EFC) revealed details of Egypt’s gross domestic production (GDP) performance in Q3 of fiscal year (FY) 2014/2015 in a Wednesday report.
The report is based on Ministry of Planning data, while data for Q4 of FY 2014/2015 has not yet been released.
Real GDP growth reached 3% in Q3 of 2014/2015, decreasing from 4.3% in the previous quarter, while it increased from 2.5% in Q3 of 2013/2014, according to Decode EFC.
However, it further showed that real GDP growth has reached 4.7% in the first three quarters of FY 2014/2015, increasing from 1.6% during the same period in the previous year.
In June, the World Bank issued a report outlining that GDP growth will reach 4.3% in FY 2014/2015, while it has predicted that GDP growth will register 5% by FY 2016/2017.
Moreover, earlier in June, the cabinet announced the FY 2015/2016 budget, targeting a 5% growth during the new fiscal year.
Dcode further revealed the key drivers of growth, where investments recorded an annual real growth of 35.7%, contributing 5.1 percentage points (PPT) to GDP growth in Q3 of FY 2014/2015. This compared to 0.83 PPT in Q2 of FY 2014/2015, and 1.11 PPT in Q3 of FY 2013/2014.
“The remarkable growth in investments was supported by leveraged public investments, especially on national mega projects as well as an improvement in private investors’ sentiment and expenditure in the lead up to the Economic Summit,” the report said.
Consumption grew by only 1.8%, contributing 1.7 PPT to GDP growth in Q3 of FY 2014/2015, compared to 4.3 PPT in Q2 of FY 2014/2015, and 4.9 PPT in Q3 of FY 2013/2014. The consumption slowdown was partly due to an increase in inflation to reach 10.6% in Q3 2014/2015, compared to 10.3% in same period previous year, according to Dcode.
Regarding net exports, which cover goods and services exports minus goods and services imports, the report showed that it has expanded by 38.2% in Q3 of FY 2014/2015. This contributed -3.8 PPT to real GDP growth, compared to -0.83 PPT in Q2 of FY 2014/2015 and -3.5 PPT in Q3 of FY 2013/2014.
The report added that the trade deficit has widened due to three factors: the Egyptian pound’s depreciation against the US dollar by 6.3% in January and February 2015; the slowdown in the manufacturing and exporting sector due to delayed imports of raw material; and the contraction in tourism sector caused by the depreciation of the Russian rouble against the Egyptian pound.
However, it further showed that the majority of economic sectors recorded a positive annual growth rate, except for the tourism and extractive industries, which witnessed decline.
The construction and building sector has increased by 11.8% in Q3 of FY 2014/2015, recording its highest annual growth rate, compared to 9.2% in Q2 of FY 2014/2015 and 6.8% in Q3 of FY 2013/2014.
In Q3 of FY 2014/2015, the Suez Canal grew by 7%, compared to 5.3% in Q2 of FY 2014/2015 and 3% in Q3 of FY 2013/2014.
Meanwhile, the manufacturing sector declined in Q3 of FY 2014/2015, to record 0.2%, decreasing from 8.3% in Q2 of FY 2014/2015, and 9% in Q3 of FY 2013/2014.
Moreover, despite the tourism sector’s growth by 53% in H1 of FY 2014/2015, it recorded the highest annual real contraction in Q3 of FY 2014/2015, decreasing by 9.3%.
Furthermore, oil and gas extractive industries also contracted by -3.1% in Q3 of FY 2014/2015, compared to -4.6% in Q3 of FY 2013/2014, reflecting the decline of natural gas output.
“The decline in international oil prices has discouraged international oil firms to significantly increase their investments despite efforts by the government to solve the sector’s problems, including the gradual repayment of arrears and contractual natural gas prices paid to some foreign firms,” the report said.