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Egypt’s economy to grow 5% in 2021-22 as rebound continues

Egypt’s economy will grow 5.0% in the fiscal year that ends in June next year, a Reuters survey predicted on Monday, unchanged from analysts’ expectations in a similar poll three months ago and slightly below the government’s target of 5.4%.

Gross domestic product (GDP) of the Arab world’s most populous country was seen growing 5.5% in the fiscal year ending on June 30, 2023, the July 5-26 poll showed.

The government has said it expected the economy grew 2.8% in the 2020/2021 fiscal year despite the huge disruption across the global economy, retaining its place as one of the few emerging markets to achieve GDP growth despite the COVID-19 pandemic.

The pandemic caused tourism to collapse in March 2020 and other parts of the economy to slow, as Egypt maintained a large trade deficit, which rose 9% to $30.6 billion in July 2020-March 2021 compared to the year prior.

Allen Sandeep of Naeem Brokerage said Egypt’s high current account deficit was partly a result of lower tourism revenues.

“The hope is that non-oil foreign direct investment picks up, local industry, local manufacturing takes over, and then you have substitution for imports,” he said.

Inflation was forecast at 6.0% in the fiscal year that ends in June, down slightly from an expectation of 6.4% three months ago. The headline price index is seen at 6.8% in the 2022/2023 fiscal year, revised up from an April projection of 6.2%.

Inflation has slowed as inventories have piled up after the market was throttled by supply chain disruptions last year due to the pandemic. Lower household consumption has also led to lower inflation.

“Now, if we see this COVID dragging on and tourism being quite weak … there will be a time when we cannot go on borrowing,” Sandeep said, adding that Egypt already pays debt investors a large premium over its central bank rates.