Egyptian economy witnessed improved performance across key sectors, as a result of tighter fiscal management and increased capital inflows which drove an economic rebound in 2017, with growth expected to accelerate further in 2018, according to a “Year in Review 2017” report published by Oxford Business Group (OBG).
The report cites Egyptian economy as continuing its upward path in FY 2016/17, after achieving a GDP growth of 4.2%, higher than earlier IMF estimation of 3.5%. The highest growth rate was recorded in the second half of the year, registering an average rate of 4.6%, which is the fastest pace on record since FY 2009/10.
One of the main drivers behind the recovery was the revival of tourism. According to preliminary data from the Central Bank of Egypt (CBE), the sector recovered from a contraction of 25.5% in FY 2015/16 to post growth of 3.9% in FY 2016/17.
Moreover, tourism sector growth has been supported by a higher number of arrivals from traditional markets, such as Western Europe, and also visitors from new markets, including China and the Gulf.
On the other hand, the communication sector was highlighted by the report as the best performing sector in FY 2016/17, after recording a 12.5% growth, followed by construction and transport sectors, which expanded by 9.5% and 5.3%, respectively. Agriculture and manufacturing, considered the cornerstone of Egypt’s economy, posted gains of 3.2% and 2.1%. However, extractive industries declined by 1.8%.
Meanwhile, net foreign direct investment reached 3.4% of GDP during the same period, according to the Ministry of Finance (MoF).
According to the report, energy exports witnessed an increase of 15.4% over FY 2016/17, coupled with a 16.2% rise in non-oil exports, reflecting the positive impacts associated with November 2016 currency floatation.
The report cites Minister of Finance Amr El Garhy forecasting that GDP growth in FY 2017/18 will record 5-5.25%, up from earlier estimates of between 4.6% and 4.8%.
Consequently, the fiscal deficit dropped to 2% of GDP by the end of September 2017, down from 2.2% at the same period last year. On the other hand, the current account deficit was reduced by 21.5% in FY 2016/17, and 65.7% y-o-y in July-September – while capital inflows strengthened, with $29bn and $6.2bn coming from external sources over the respective periods.
Moreover, Egypt’s balance of payments recorded a $13.7bn surplus in FY 2016/17, up from a $2.8bn deficit in the preceding 12 months.
With regards to monetary indexes, inflation dropped to 26.7% in November, which is the lowest recoded level since December 2016.
However, CBE maintained its hold on rates, leaving the overnight deposit rate at 18.75% and the overnight lending rate at 19.75%, remaining confident of meeting a projected inflation rate of 13% by August 2018.
On the other hand, unemployment declined to 11.9% by the end of September 2017, down from 12.5% at the beginning of the year, its lowest figure since 2011.
OBG estimates that Egypt’s positive economic performance looks set to continue in 2018, following the release of the IMF’s $2bn tranche as part of its $12bn loan programme, which makes the total amount received $6bn. Egypt also received $1.15bn in loans from the World Bank to strengthen public finances in December 2017 bringing the bank’s total loans to $3.15bn, with the funding likely to support stronger growth and a continuation of the reform process in 2018.