IMF projects Egypt's economy will grow 2.8pc in 2020/21 year

CAIRO: The International Monetary Fund (IMF) raised its growth forecast for Egypt's economy this financial year to 2.8%, matching the lower end of the government's own estimate and citing milder-than-expected contraction during the coronavirus pandemic.

Egypt's economy had been boosted in the last three years by an upswing in tourism, strong remittances from Egyptian workers abroad and recently discovered natural gas fields coming onstream.

But since the coronavirus outbreak, tourism has collapsed, the price of gas has plummeted, and worker remittances have come under threat with the decline of oil revenues in Gulf Arab states, where many Egyptians are employed.

"The growth impact of the COVID-19 crisis has so far been less severe than expected, as strong consumption helped offset weak tourism and investment," the IMF said in the first review of Egypt's latest stand-by arrangement.

In June, it had forecast the economy would grow 2% in the 2020/2021 financial year which runs from July to June.

The fund said Egyptian authorities noted some flexibility in reallocating spending to support more vulnerable sectors and groups during the second wave of the COVID-19 pandemic.

"The still-high level of public debt and gross financing needs also leave Egypt vulnerable to a reversal of capital flows, which risk triggering again financing and exchange rate pressures," the IMF said.

In an attached addendum to the IMF's report, the Egyptian government said that the impact on tourism, manufacturing and construction was partly offset by modest growth in most other sectors, despite pandemic-related restrictions.

Egypt in March announced a 100 billion Egyptian pound ($6.39 billion) stimulus package, including compensation for day labourers affected by lockdown measures and support for the tourism sector.

The government also said that the central bank had spent 500 million Egyptian pounds ($31.95 million) from an allocated 20 billion Egyptian pounds ($1.28 billion) to support the stock exchange, which ended 2020 as the Middle East's weakest performer.

"Exceptional financial sector measures, taken in response to the COVID-19 outbreak - including but not limited to the [Central Bank of Egypt's] stock purchase program - will be rolled back when conditions allow," the government said.