The International Monetary Fund (IMF) has lowered its projections for the growth of the Egyptian economy to 3% during the current fiscal year, compared to the previous estimate of 3.6% in October.
Moreover, the IMF reduced its expectations for economic growth in the next fiscal year to 4.7%, down from the October forecast of 5.1%.
These downward revisions align with the Egyptian government's own reduction of growth expectations for the current fiscal year. The first quarter witnessed a slowdown in quarterly growth to its lowest level in nearly 10 quarters.
The Egyptian economy faces various complex challenges, including a devalued currency, rising inflation impacting real incomes, and a decline in consumption. The impact of the high interest rates set by the Central Bank, increased by 11% since the beginning of the economic crisis following the Russia-Ukraine war, has affected investment rates, particularly amid economic uncertainty and a weakened exchange rate system, with a current gap of over 100% between the official and parallel exchange rates.
Recently, revenues from the Suez Canal, a significant component of Egypt's real gross domestic product (GDP), were affected by Houthi attacks in the Red Sea, leading to a decline in shipping traffic through the Suez Canal.
With a 11% drop in Zohr field production during the previous fiscal year and Egypt losing its self-sufficiency in gas, the support provided by net petroleum exports to domestic output in previous years has disappeared. The Ministry of Petroleum is working to overcome this by attracting new investments, increasing production from mature fields, and expanding offshore exploration.
Globally, the IMF raised its projections for global growth in 2024 to 3.1%, up from 2.9% in October, while maintaining the forecast for 2025 at 3.2%. The IMF attributed the upward revision to higher-than-expected resilience in the U.S. economy and several major emerging and advanced economies, along with financial support in China.
However, the IMF noted that global growth still lags behind the 2000-2019 average of 3.8%, given high interest rates in central banks and the withdrawal of financial support, with debt burdens casting a shadow on economic activity.
