Prime Minister Mostafa Madbouly said the other day Egypt’s gross home product (GDP) grew 5.6% in the 2018/19 fiscal calendar year, a bit higher than the 5.5% expected in the April Reuters poll. Barring the essential oil industry, Egypt’s overall economy has struggled to attract international investors since the 2011 uprising that ended Hosni Mubarak’s 30-year rule.
Egypt’s non-oil private-sector activity contracted for the next consecutive month in June, according to the Emirates NBD Egypt Purchasing Managers’ Index (PMI). Private-sector activity has extended in mere five months during the last three years. “Even as leading economic indicators point towards weak consumer spending and stress on local firms, rising investment and government spending are supporting higher economic growth,” said Nadene Johnson, an economist at NKC African Economics.
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Earlier this month, Egypt presented its latest round of energy subsidy cuts, increasing prices by 16-30%, as it nears the end of the IMF programme. 12 billion reform package signed with the International Monetary Fund in 2016, as Egypt’s economy struggled to recover from the turmoil that followed the 2011 uprising.
Other reforms included a razor-sharp devluation of the Egyptian pound and the introduction of a value-added tax. “Rising energy and electricity prices in colaboration with energy subsidy reforms shall keep inflation elevated in the coming a few months,” Johnson said. Median forecasts from the poll showed predicted 5.8% GDP growth in the fiscal 12 months closing in June 2021 and 5.5% in the 2021/2022 fiscal calendar year. To fuel growth, “interest levels need to be cut by at least 300 basis points,” said Allen Sandeep, head of research at Naeem Brokerage. “And hopefully, that would increase spending and investments, and ease the tightness in liquidity which we are witnessing also,” he said.
The new consensus sees Egypt’s metropolitan consumer inflation at 13.0% in the 2019/20 fiscal calendar year, down from the 14.2% predicted 90 days ago for the last fiscal year. Annual metropolitan consumer price inflation plunged unexpectedly to 9.4% in June from 14.1% in-may, before fuel prices were raised. Analysts expect headline inflation to decelerate to 10.9% in the 2020/21 fiscal 12 months and 9.0% in the 2021/2022 fiscal calendar year. Core inflation, which strips out volatile items such as food, dropped to 6.4% in June from 7.8% in May. An incredible number of Egyptians live below the poverty struggle and collection to meet basic needs.
The end of world wide web asset buys — which economists expect to be announced at the ECB’s Dec. 13 conference — is the first step on a long street of paring back again stimulus, he said. ‘It’s clear that the next steps in normalization will depend on how the data develops,’ Weidmann said. 77bn of bonds in 2018… This is the lowest amount raised in the first 11 a few months of the year since 2008 and down greater than a quarter on the same period last year.