Fitch Solutions Revises Egypt’s Real GDP Growth Slightly

Fitch Solutions revised up Egypt’s real GDP growth forecast by 0.1 percent for 2022 to reach 5.6 percent, up from the 5.5 percent it projected in April, according to Fitch Solutions’ MENA Monthly Outlook Report.

Driven by the ongoing economic challenges caused by the Russian-Ukrainian conflict, the Egyptian government lowered its expectations for the country’s real GDP growth in the upcoming which starts on 1 July — to 5.5 percent, down from the 5.7 percent it previously projected.

The report also raised its projections for Egypt’s inflation to 13.2 percent, up from 10 percent, up from the 7.1 percent it expected in April, continuing the trend of being the country with the third highest inflation rate in the region following Lebanon (171 percent) and Iran (29 percent).

Since the onset of the war in Ukraine, Egypt’s inflation has passed double digits, hitting 10 percent in February.

According to the latest figures announced by the Central Agency for Public Mobilisation and Statistics (CAPMAS), Egypt’s headline annual inflation rate rose to 14.9 percent in April, up from the 12.1 percent recorded in March and 4.4 percent in the corresponding month in 2021.

As a result, inflation in urban areas jumped to 13.1 percent. In terms of the monetary policy’s prediction, the report anticipated the Central Bank of Egypt’s (CBE) interest rate to average 13.2 percent in 2022, expecting the USD’s value against the EGP to stand at EGP 18.3 in 2022.

The CBE also raised its key interest rates in March amid the ongoing challenges of the Ukrainian war and the rising food and energy prices by one percent (100 basis points) and devalued the EGP by about 14 percent.

As a result, USD’s trading price against the EGP reached its all-high time in five years, averaging EGP 18.3 for selling and EGP 18.2 for purchasing at the beginning of trading .

Starting 1 July, Egypt’s FY2022/23 budget will be rolled out with a total value of EGP 9.2 trillion — the highest in the country’s history — growing by 16.3 percent compared to the current FY2021/22 budget.

The FY2022/23 draft budget shows that the government is targeting an inflation rate of nine percent, which is the same target the CBE set through the end of 2022.

Additionally, the draft budget is aiming to bring in EGP 1.5 trillion by raising tax revenues by 23.5 percent in FY2022/23 by accelerating the plan to merge informal economic activities into the formal economy and expanding the adoption of tech solutions, especially in tax and customs collection.

Moreover, the government is targeting EGP six billion in revenues from resuming its initial public offering programme (IPO).

It also plans to increase VAT revenues by 22.6 percent to register EGP 477.6 billion, with real-estate tax revenues expected to rise to EGP 7.7 billion — up from EGP 5.7 billion in FY2021/22 — as well.

In May, the European Bank for Reconstruction and Development (EBRD) raised its projections for Egypt’s GDP growth for the current FY2021/22 to 5.7 percent — which ends in June — up from the 4.9 percent it projected in November.

Furthermore, the International Monetary Fund (IMF) revised its projections for Egypt’s real GDP growth up in 2022 by 0.3 percent to reach 5.9 percent, up from January’s 5.6 percent prediction.

Meanwhile, the World Bank maintained the country’s real GDP growth at 5.5 percent in FY2021/22.

It is also worth noting that Fitch Ratings and Standard and Poor’s recently kept Egypt’s credit ratings at B+ and B with a stable economic outlook.