Fitch Solutions, a research company of Fitch Ratings Agency, expects a slowdown in the growth of economic activity in Egypt during the next 12 months, as a result of the repercussions of the Russian-Ukrainian war.
It explained that this will be reflected in the decline in economic growth estimates to 4.3 percent in the current fiscal year, compared to 6.2 percent in 2021/22.
It warned that the Egyptian pound’s weakness more than expected could stimulate inflation and increase the burden on domestic consumption, which could push growth to slow between 3.3 and 3.8 percent in 2023/2022.
In terms of inflation, Fitch Solutions said it will continue to be in the double digits, which will affect domestic demand and slow investment activity.
It is expected that the average inflation will reach 15.2 percent during the second half of this year.
Rising interest rates
Fitch Solutions also expected the Central Bank of Egypt to raise interest rates by 100 basis points, stressing that the high cost of debt servicing and the slowdown in economic growth would reduce CBE’s resolve towards strong monetary tightening.
It ruled out that tourism revenues or the number of tourist arrivals would return to the record level of 2018/2019, until the fiscal year 2024/2023.
This comes days after similar forecasts by BNP Paribas, in which it expected that the growth rate of the Egyptian economy would reach 4.5 percent during the current fiscal year, and that inflation would average 14.5 percent.
BNP Paribas also expected that the budget deficit would reach 7 percent of GDP and external debt 38 percent of GDP, and that the current account deficit would decline to 3.4 percent of GDP compared to 3.7 percent in the previous fiscal year.
The Egyptian economy recorded 6.6 percent growth during the previous fiscal year 2021-2022, the highest since the 2006-2007 fiscal year.
