Cairo – October 22, 2023: International ratings agency S&P Global revised its forecast for Egypt’s real GDP growth, lowering its projection to 4 percent for fiscal year 2023/2024 and 3.5 percent for FY2024/2025. The agency expects growth to climb to 3.8 percent in FY2025/2026.
In its release, the agency noted that the new projection for the current fiscal year was due to the impact of the foreign currency shortage on imports.
On a positive note, S&P highlighted the government’s decision to stop projects with significant FX costs or are at a completion rate of 50 percent or less, noting that it expected this to reduce related imports and support the country’s external position.
Regarding its FY2024/2025 forecast, the ratings agency explained that market confidence should improve once the central bank’s long-term strategy for the exchange rate becomes more evident. In a recent release, the Central Bank of Egypt (CBE) reported that Egypt’s foreign direct investments rose to $10 billion in FY2022/2023 and was able to achieve a surplus of $882 million during the same FY.
S&P’s report highlighted the construction and energy sectors as key drivers of growth, pointing out that Egypt’s Hayah Karima program should further support infrastructure development.
The agency noted that it expects President El-Sisi to be re-elected during this year’s elections, and will “lead the government in its pursuit of the key tenets of the IMF program.”
S&P’s forecast for Egypt’s budget deficit stated that it will rise to about 7 percent of GDP on average, over the period through FY2026, with 5.8 percent for the current fiscal year.
Anticipating another devaluation, S&P expects the LE to hit close to the black market’s LE 40 against the USD. "In our view, the authorities may be tempted to re-introduce foreign currency controls as they have done previously, should currency volatility worsen," S&P stated.
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