IMF forecasts Egypt’s economy to grow by 4.5% in 2017/18

CAIRO - 18 April, 2017: Egypt’s economic growth is projected to accelerate from 3.5 percent in the current fiscal year FY2016/17 (to end June 30) to 4.5 percent in 2017/18, the International Monetary Fund (IMF) said Tuesday.


To give a boost to its limping economy and overcome a sharp shortage of much-needed foreign currency, Cairo applied a set of procedures as a part of a comprehensive reform program endorsed by the IMF in November. These reforms included free floating the pound, slashing energy subsidies, and introducing a long awaited value added tax (VAT).


Today’s forecast is well below the IMF’s previous forecast of four percent for 2016/17, which was revealed in the documents of the $12 billion extended facility loan agreement signed with the Egyptian authorities late in November to support the country’s ambitious reform program.


IMF expects the economy to post 4.3 percent growth by the end of 2016/17, while senior government officials have recently announced they revised growth figure for FY2016/17 down to four percent.


“Comprehensive reforms are expected to deliver sizable growth dividends, lifting growth from 3.5 percent in 2017 to 4.5 percent in 2018,” IMF said in its World Economic Outlook (WEO) released Tuesday.


A macroeconomic forecast by Mubasher International was identical with the IMF’s assessment for the projected growth during 2016/17. “We believe that economic growth may hit around 3.5 percent to 3.8 percent in FY2016/17, and we find that 4 percent —in such a tremendous fiscal year—is some kind of great expectations.”


Inflation is expected to fall to 16.9 percent in 2017/2018, down from IMF’s average of 22 percent during the current fiscal year, according to the report. Yet, the forecast is well below a 30-year high year-on-year in March, when inflation jumped to 30.9 percent from 30.2 percent a month earlier; according to state-statistics body CAPMAS.


Inflation accelerated in Egypt since November on the back of the pound’s 50 percent plunge against the dollar after the flotation, coupled with the VAT introduction and subsidy cuts.


Unemployment rate is projected to slightly pickup from 12.7 percent in the current fiscal year to 12.6 in 2017/18, according to the WEO report.


A mission from the IMF is scheduled to visit Egypt by the end of April to conduct the program’s first review in order to approve the disbursement of the loan’s second tranche worth $1.25 billion.


"The IMF mission conducting the first review will start the last week of April for about two weeks. Exact dates to be announced closer to the visit," IMF spokesperson, Randa El- Naggar told business today Egypt.