Egypt: GDP growth accelerates in Q3 of FY 2021
The economy expanded 2.9% year-on-year in the third quarter of FY 2021 (January–March 2021), according to estimates released by the Ministry of Planning and Economic Development. The reading followed the 2.0% increase recorded in the second quarter of the fiscal year and marked a continued, albeit mild, recovery for the Egyptian economy.
The upturn was driven by a broad-based improvement in all sectors of the economy. Domestically, private consumption growth inched up to 7.7% in the quarter (Q2: +7.6% year-on-year), while public spending growth rose to 5.8% in Q3 (Q2: +4.3%). Meanwhile, fixed investment fell at a markedly reduced rate of 11.3% (Q2: -22.7% yoy).
In the external arena, exports of goods and services fell 6.3% in annual terms in Q3, softening significantly from the 27.1% drop clocked in Q2. Recovering demand in key international markets amid milder lockdown conditions during the period likely drove the improvement. Meanwhile, imports returned to growth in Q3, rising 6.3% and contrasting Q2’s 13.9% contraction.
Going forward, the recovery is projected to have accelerated in Q4 (April–June 2021), driven in no small part by a healthy base effect: Q4 FY 2020 saw the economy contract for the first time in nearly a decade due to the effects of the pandemic. However, an upswing in Covid-19 cases both domestically and in key international markets, and the associated continuation of restrictions, is likely to have held back activity somewhat.
Regarding the outlook for the current fiscal year as a whole, analysts at the EIU commented:
“Because of government support for major projects and a strong pickup in goods exports, we expect the economy to have expanded by 3.3% in fiscal year 2020/21 (July 2020–June 2021). The economy will grow more strongly in 2021/22, by 4.4%, as global demand returns to pre-pandemic levels and new energy projects gain momentum, delivering strong goods export growth. However, pandemic-related global headwinds will continue to hinder several sectors. Tourism, which accounts for about 9.5% of employment and 5.5% of GDP, will remain severely affected by international travel restrictions, a slow vaccine rollout in some leading markets and the protracted domestic vaccine rollout.”