Investment in Egypt
Egypt - Investment
GDP contracts for first time in nine years in Q4 of FY 2020
The economy contracted 1.7% year-on-year in the fourth quarter of FY 2020 (April–June 2020), according to estimates announced by the Ministry of Planning and Economic Development. The reading contrasted the 5.0% growth recorded in the third quarter, and marks the first quarterly contraction since Q4 of FY 2011 as the full extent of the coronavirus-related containment measures enacted in late March pounded the economy. As such, GDP growth for the 2020 full fiscal year (July 2019–June 2020) slowed to 3.6% from 5.6% in FY 2019, marking the lowest rate of expansion since 2014.
Looking at the details of the release, Q4’s result was driven by a mild downturn in domestic demand and a much larger contraction in the external sector. Domestically, capital spending capitulated, with fixed investment falling 56.2% in the quarter (Q3: -20.0% year-on-year) as widespread uncertainty hindered spending plans. However, both private consumption (Q4: +11.5%; Q3: +7.2% yoy) and public spending (Q4: +14.0%; Q3 +2.6% yoy) accelerated in the final quarter of the fiscal year, somewhat tempering the overall decline in domestic demand. Panic-buying in the wake of the announcement of lockdowns, strong remittance growth, mild inflation and the Central Bank’s substantial 300-basis-point rate cut in mid-March all likely played a part in the uptick in household spending.
In the external arena, exports plunged 48.5% in annual terms in Q4, worsening from the 16.6% contraction clocked in Q3. Slumping demand in key international markets and a significant reduction in tourism figures likely weighed heavily on the quarter’s outturn. Meanwhile, imports dived 24.7% in Q4, deteriorating from the 20.6% contraction recorded in Q3, reflecting both weakening domestic demand and supply chain disruptions as a result of widespread international lockdowns.
Going forward, the downturn in GDP is projected to soften in the first half of FY 2021, before growth returns in H2. A recovering external environment should aid the improvement, as key international markets reopen following stringent lockdowns. However, despite a relatively low level of daily new Covid-19 cases domestically, the stubbornly high infection rate in Europe and the U.S. presents a key downside risk to growth in FY 2021.
Commenting on Q4’s results, Callee Davis, an economist at Oxford Economics, preached caution regarding the outlook:
“While economic growth in the 2019/20 FY surprised to the upside largely supported by remarkably strong consumption, it was still weak relative to previous years. We suspect that the uptick in consumption was temporary and forecast a gradual decline back to pre-pandemic levels by 2020/21 FY. Although we forecast a gradual recovery in real GDP growth going forward, supported by an uptick in investment and exports, real GDP will only recover to precrisis levels by early 2021/22 FY.”
FocusEconomics Consensus Forecast panelists project the economy to expand 2.3% in FY 2021 and 5.1% in FY 2022.
Egypt - Investment Data
|Investment (annual variation in %)||-||-||-||-||-|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||13.70||0.0 %||Dec 31|
|Exchange Rate||16.04||0.0 %||Jan 01|
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February 4, 2021
At its monetary policy meeting on 4 February, the Central Bank of Egypt (CBE) left the overnight deposit, overnight lending and main operation rates unchanged at 8.25%, 9.25% and 8.75% respectively.
February 3, 2021
Egypt’s Purchasing Managers’ Index (PMI)—which measures business activity in the non-oil private sector—rose slightly to 48.7 in January from 48.2 in December.
January 11, 2021
Consumer prices decreased 0.42% in December over the previous month, which contrasted November's 0.82% increase.
January 5, 2021
Egypt’s Purchasing Managers’ Index (PMI)—which measures business activity in the non-oil private sector—sank to 48.2 in December from 50.9 in November.
December 24, 2020
At its monetary policy meeting on 24 December, the Central Bank of Egypt (CBE) kept the overnight deposit, overnight lending and main operation rates unchanged at 8.25%, 9.25% and 8.75% respectively.