Egypt: Economy continues gathering pace in October–December period
February 15, 2018
GDP increased 5.3% year-on-year in the October–December period (which is Q2 of Egypt’s 2018 fiscal year) according to the Ministry of Planning, up marginally from the 5.2% expansion in the July–September period and marking a multi-year high. As a result, GDP growth has now accelerated for five consecutive quarters, demonstrating that the economy is gathering momentum following a series of IMF-induced reforms that began in November 2016 with the floating of the pound.
Although comprehensive data has yet to be released, the Central Bank reported that buoyant external demand drove the strong reading. Egyptian firms likely reaped the benefits of healthy global growth and the significantly weaker pound. This fits with PMI readings for the quarter, with firms in the non-oil private sector experiencing growth in exports during October and November. Public domestic demand also buttressed growth, although private domestic demand was less dynamic, with consumers’ spending power likely continuing to come under pressure due to high inflation.
Looking ahead, Egypt’s economic panorama is increasingly positive. The sharp fall in inflation observed in recent months should boost private consumption, while investment will benefit from recent reforms to improve the business environment, such as new industrial licensing and bankruptcy laws. However, the fiscal position remains vulnerable, with elevated public debt and a sizeable budget deficit, despite recent progress in curtailing costly subsidies.
Author: Oliver Reynolds, Economist