RIYADH: The Egyptian economy is expected to contribute around 1.7 percent to the growth of the global economy over the next five years, according to a Bloomberg calculation done on data released in the International Monetary Fund’s World Economic Outlook.
This places the North African country in the ninth rank among the largest countries contributing to the expansion of the world economy until 2028.
China is expected to be the biggest growth driver over the next five years with 22.6 percent share, according to Bloomberg calculations.
It will be followed by India and the US which are expected to contribute 12.9 percent and 11.3 percent to the global economy.
The IMF cut its forecast for Egypt’s real gross domestic product for the current fiscal year to 3.7 percent from its previous projection of 4 percent.
The IMF’s economic outlook report predicts the country’s real GDP growth for 2023/2024 to reach 5 percent, down from a previous forecast of 5.3 percent.
Egypt’s inflation is also expected to hit 21.6 percent in 2023 before dropping to 18 percent next year, the IMF report stated.
This saw the credit agency S&P Global downgrading Egypt’s outlook to negative as the country’s funding sources may not cover its high external funding requirements of $17 billion in the fiscal year ending June 30, 2023, and $20 billion in fiscal 2024.
The country’s long and short-term foreign and local currency sovereign credit rating remained at “B/B”, noted the agency.
“The negative outlook reflects risks that the policy measures implemented by Egyptian authorities may be insufficient to stabilize the exchange rate and attract foreign currency inflows to meet the sovereign fund’s high external financing needs,” S&P Global Ratings said in a report.
The Egyptian Minister of Finance Mohamed Maait attributed the downgrade to external pressures on the country’s economy.
The Ukraine war’s adverse global economic repercussions led to unprecedented inflation in the Egyptian economy, Maait said in a statement on the Cabinet’s Facebook page.
S&P added that Egypt’s credit rating could progress in the near future if the country was capable of meeting its foreign currency financing needs.
This could be done through exchange rate flexibility and attracting large inflows of foreign currency through its program of offering stakes in state-owned enterprises.
Maait added: “We are proceeding with the implementation of the economic reform program supported by the IMF.”
In a bid to tackle the high external financing needs of the Egyptian economy, the government will implement a package of financial, monetary and structural measures, noted the minister.
Maait also highlighted the growth in foreign currency inflows to the country, in addition to the oil export industry’s solid performance and recent peak in natural gas export revenues of $700 million per month.
In August 2022, the state endorsed a plan to limit electricity consumption with the aim of preserving natural gas for export and obtaining foreign currency.
The minister disclosed that foreign direct investment surged 71 percent to reach $9.1 billion in 2022 from $5.2 billion the year before, and that remittances from expatriates reached $33 billion last year.
Non-oil exports increased by 29 percent and Suez Canal revenues increased to $7 billion last year and are expected to reach more than $8 billion in 2023, in addition to the growth of tourism revenues, he said.
Egypt’s new budget has set aside 127.7 billion Egyptian pounds ($4.17 billion) for food subsidies, representing a growth of 41.9 percent annually.
In addition, 119.4 billion Egyptian pounds were allotted for petroleum subsidies; and 6 billion Egyptian pounds for health insurance and medications, representing an increase of 58.2 percent over the previous fiscal year.
Due to the recent war-led skyrocketing inflation, the country has faced a shortage of foreign currency and an increase in the cost of basic goods, pushing it to raise interest rates by 1,000 basis points and devalue the Egyptian pound three times since March of last year.