Consumption in Egypt

Egypt - Consumption

Growth accelerates in January–March

The economy expanded 5.6% year-on-year in January–March (FY2019 Q3), slightly faster than the 5.5% growth recorded in October–December.

Although comprehensive data is not yet available, the government’s fiscal accounts show its spending rose sharply in July–March compared to the same period a year earlier, indicating strong consumption on its part. A large chunk of this increased spending went on higher public salaries, which, combined with the unemployment rate dropping to the multi-year low 8.1%, suggests private consumption was also healthy in January–March. In addition, higher public expenditure on investment and continued eager private-sector interest in the hydrocarbon sector should have supported fixed investment growth.

Looking ahead, the economic outlook appears bright. Private spending should strengthen in the coming months on slowly receding inflationary pressures, higher public salaries and lower unemployment. That said, inflation may temporarily pick up from June, when public fuel subsidies are expected to be cut. 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, Egypt’s hosting of the Africa Cup of Nations in June–July and the tourism sector’s slow recovery should boost exports, although security concerns and global trade protectionism could hamper export potential.

FocusEconomics panelists expect GDP to expand 5.2% in FY 2019, which is unchanged from last month’s forecast, and 5.2% again in FY 2020.