Egypt Economic Outlook
The economy ended H1 FY 2023 (July–December 2022) on a softer footing, and momentum should have waned further at the start of H2 as challenges mounted. In Q3 FY 2023, headline and core inflation averaged over 30% and nearly 40%, respectively—fueled in no small part by the Egyptian pound having weakened over 20% so far this calendar year. The ailing currency, compounded by higher interest rates as the Central Bank responded aggressively to inflation, pressured purchasing power further, boding ill for spending. Additionally, non-oil private-sector PMI data revealed conditions deteriorated at a steeper pace compared to Q2. In other news, in late March, the World Bank approved a USD 7 billion loan for FY 2023–2027; the funds will support improvements in education and health services, boost private sector jobs and help adapt to climate change.
Inflation moved further above the upper bound of the Central Bank’s 5.0–9.0% target band to a multi-year high of 32.6% in March (February: 32.0%). More positively, core inflation moderated to 39.5% from February’s 40.3%. The steep weakening of the pound has fueled inflation in recent months. Inflation is expected to peak soon, but further currency weakening is an upside risk.