Daily News Egypt

Egypt's economic growth to remain strong in medium-term: Fitch - Daily News Egypt

Advertising Area

Advertising Area




Egypt’s economic growth to remain strong in medium-term: Fitch

Macroeconomic, political stability support Egypt’s positive growth 2017 to current health crisis


Egypt’s economic growth will remain strong in the medium-term thanks to strong investment and a recovering consumer environment, according to Fitch Solutions.

Fitch analysts expect growth to remain strong in the next five years. The economy will continue to be dominated by private consumption, though fixed investment will grow the fastest in the short-to-medium term.

From 2017 until the coronavirus (COVID-19) crisis hit, Egypt’s positive growth story was effectively one of pent-up demand that had been unleashed by increased macroeconomic and political stability. This process will not necessarily be nullified by the crisis, but perhaps dampened and delayed.

Fitch added that sustained strong growth rates over the long-term will also require more structural reforms. The next few years will prove formative in this regard. With IMF-led reforms having helped restore macroeconomic stability, the government can now move onto making more structural changes to the economy.

Government consumption as a share of GDP will likely decline over the long-term, barring some backtracking in the next couple of years due to the need for coronavirus-related stimuli.

The Al-Sisi government has shown a strong commitment to reducing the fiscal deficit, and looks likely to remain in power for the foreseeable future. Fitch analysts also believe the authorities will be keen to shift resources away from consumption onto capital spending.

On the other side, consumer price inflation will gradually slow in Egypt over the next few years, following two years of very high levels of price growth.

Fitch analysts forecast inflation to average 5.4% over the coming decade, compared to a peak of 29.6% in 2017 and 9.4% in 2019. This view is primarily based on their expectation for subsidy cuts to become less frequent, although a very weak oil price outlook also underpins this forecast.

At Fitch Solutions, analysts believe the Central Bank of Egypt (CBE) will hold the overnight lending rate at 10.25% over the remainder of 2020. The CBE will likely return to easing in 2021, and they expect the overnight lending rate will end 2021 at 9.75%.

Topics: Fitch medium-term

Advertising Area

https://www.dailynewssegypt.com/2020/06/03/egypts-economic-growth-to-remain-strong-in-medium-term-fitch/
Breaking News

No current breaking news

Receive our daily newsletter
Subscribe