Egypt: Economy continues gathering pace in the January–March period
June 28, 2018
GDP increased 5.4% year-on-year in the January–March period (which is Q3 of Egypt’s 2018 fiscal year) according to the Ministry of Planning, up marginally from the 5.3% expansion in the October–December period and marking a multi-year high. As a result, GDP growth has now accelerated for six 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 not yet been released, the Central Bank reported on 28 June that economic growth was supported by healthy investment, from both external and domestic sources. Investors were likely encouraged by healthy global growth, the weaker pound and increased interest in the domestic oil and gas sector. Overall, stronger economic growth also fits with PMI readings for the non-oil private sector in the January–March period, which recorded the highest average reading on record.
Looking ahead, Egypt’s economic panorama is increasingly positive. The continued fall in inflation observed through May, coupled with higher salaries and pensions in the public sector from July, should boost private consumption. Investment will benefit from recent reforms to improve the business environment, such as new industrial licensing, bankruptcy and foreign investment laws. However, the fiscal position remains vulnerable, with elevated public debt and a sizeable budget deficit, despite recent progress in curtailing costly subsidies.
Author: Edward Gardner, Economist