Egypt Economic Outlook
GDP expanded 3.9% year on year in Q3 FY 2023 (January–March 2023), matching Q2’s increase, according to the Central Bank of Egypt (CBE). The economy fared well in the face of persistent headwinds, although it is uncertain if that will have carried on in Q4 FY 2023 (April–June 2023) and into Q1 FY 2024 (July–September 2023). Core and headline inflation accelerated further in recent months, hitting record highs in June and July, respectively. The steep rise was partly due to the Egyptian pound’s sharp weakening against the USD so far this calendar year and a shortage of foreign currency. As a result, consumption has likely taken a hit from eroded savings and purchasing power. Meanwhile, the CBE’s aggressive rate hikes—300 basis points in total between March and August—have likely been restraining credit and investment. More positively, the PMI showed that non-oil private sector conditions deteriorated at a milder pace in July.
Inflation hit a new record high of 36.4% in July (June: 35.8%), over four times the upper bound of the CBE’s 5.0–9.0% target band. In the rest of the 2023 calendar year (CY), inflation will be close to current levels. Average inflation will more than double from CY 2022 in CY 2023, and will likely exceed the CBE’s target until CY 2025. A weaker-than-expected pound is an upside risk.