Egypt: Economic growth accelerates further in April–June
July 11, 2019
The economy expanded 5.7% year-on-year in the fourth quarter of FY 2019, which ran from April to June. This was slightly faster than the 5.6% growth rate achieved in the previous quarter. In FY 2019 as a whole, the economy therefore grew 5.6%, up from 5.3% in FY 2018.
Although comprehensive data is not yet available, the government’s fiscal accounts show its investment spending rose sharply in July–May compared to the same period a year earlier, and at a significantly faster pace than inflation, suggesting that solid fixed investment could have supported economic growth. Continued private-sector interest in the hydrocarbon sector should have further underpinned fixed investment. Moreover, with the unemployment rate decreasing in recent months, private consumption should have also proved robust in the quarter. Looking at the external sector, Egypt’s hosting of the Africa Cup of Nations in June–July should have helped service exports in Q4, notwithstanding a stronger pound.
Looking ahead, the economic outlook appears bright. Private spending should strengthen in the coming months on slowly receding inflationary pressures and lower unemployment. That said, inflation may temporarily pick up as energy subsidies were slashed again in July. Meanwhile, fixed investment should continue to reap the benefits of a government push to improve both the country’s infrastructure and business environment, in addition to the private sector’s interest in the hydrocarbon sector and the Central Bank’s expected loosening of monetary policy. On the external front, the tourism sector’s slow recovery should boost service exports, although security concerns will remain a downside risk.
Author: Edward Gardner, Economist