Egypt: GDP returns to growth in Q1 of FY 2021
The economy expanded 0.7% year-on-year in the first quarter of FY 2021 (July–September 2020), according to estimates released by the Ministry of Planning and Economic Development. The reading contrasted the 1.7% slump recorded in the fourth quarter of the previous fiscal year, and marked a quick return to growth for the Egyptian economy.
Domestically, private consumption held steady in the quarter, matching the 11.8% growth clocked in Q4, while fixed investment fell at a reduced rate, declining 41.8% in Q1 (Q4: -57.4% year-on-year). However, government spending growth slowed to 3.4% in Q1, having boosted 14.0% higher in the prior quarter.
In the external arena, exports fell 41.1% in annual terms in Q1, softening from the 48.5% plunge clocked in Q4. Recovering demand in key international markets amid milder lockdown conditions during the period likely drove the improvement. Meanwhile, imports dived 22.1% in Q1, moderating from Q4’s 24.7% contraction.
Going forward, the recovery is projected to gather pace throughout the remainder of FY 2021, led by an improving external environment. However, the upswing in Covid-19 cases both domestically and in key international markets since the end of September 2020, and the associated reimposition of restrictions, is likely to have held back activity in the second quarter of this fiscal year.
Commenting on Q1’s results, Callee Davis, economist at Oxford Economics, called for caution regarding the outlook:
“The latest preliminary figures confirm that the recovery from the Covid-19 pandemic started in [Q1 FY 2021]. We nonetheless remain cautious in our assumptions for a recovery, especially considering the uneven rollout of vaccines across the globe, as well as a lack of clarity on a time frame for implementation of the Egyptian vaccination plan. Health professionals have also warned of a third Covid-19 wave, which will likely coincide with the holy month of Ramadan in April. Overall, we forecast […] a 2.0% rise in real GDP in the 2020/21 FY.”