Egypt Economic Outlook
After decelerating in the prior quarter, annual GDP growth was likely moderate in Q3 FY 2023 (January–March 2023). Both headline and core inflation accelerated to multi-year highs in the quarter as the Egyptian pound weakened nearly 20% against the USD, which will have hurt purchasing power. A more aggressive monetary policy stance likely further pressured activity. However, surging tourist arrivals will have provided support. In Q4, the outlook is improving: In April, inflation eased slightly and the non-oil PMI rose to a six-month high. In other news, in early May, Fitch Ratings downgraded Egypt’s rating to ‘B’ with a negative outlook and Moody’s placed the ‘B3’ rating under review for a downgrade. The rating agencies cited increasing risks to the country’s ability to meet financing needs amid constrained financing conditions.
Inflation eased to a three-month low of 30.5% in April (March: 32.6%). Similarly, core inflation waned to 38.6%. However, both remained above the Central Bank’s 5.0–9.0% target range. Spiraling food prices and the steep weakening of the pound have fueled inflation recently. Average inflation should peak in coming quarters, although further currency depreciation is an upside risk.