The Egyptian economy expected to continue to perform strongly

Downtown Cairo, Egypt (Photo by Shutterstock)

International financial institutions confirm the soundness of the Egyptian economy and praise the government's handling of the Russian-Ukrainian crisis. Ahmad Abdul-Rahman writes.

The Egyptian Cabinet's Media Center published a report that included data confirming the soundness of its economy. The report stated that the country has strengthened the confidence of international institutions in the performance and flexibility of the Egyptian economy and its ability to adapt and withstand the various economic challenges imposed by the Russian-Ukrainian crisis.

The report specified that the state's proactive strategy, through the economic reform programme and its fiscal and monetary policies, strengthened its ability to confront the effects of the crisis on essential sectors of the economy, and to absorb shocks and successive internal and external changes. This is in addition to the state taking the necessary measures to ease the severity of the impact of Covid-19 pandemic on citizens which has meant that international institutions maintain their optimistic expectations for the future of the Egyptian economy.

The Egyptian Cabinet's Media Center report noted that the World Bank's (WB) vision for the way Egypt has handled the crisis was very positive. It also said that the world is facing unprecedented economic repercussions and challenges because of the Corona pandemic, which is entering its third year, and the Russian-Ukrainian crisis. This has driven inflation and energy and food prices to historically high levels.

The report also said that the WB approved of the measures that Egypt has taken to confront the effects of the latter crisis. The foremost of these is the provision of financing packages to alleviate the impact of price hikes by increasing wages and pensions, while also noting that  the gas sector, the Suez Canal, the telecom and construction sectors are contributing to growth. At the same time, the WB stressed that continuing to implement structural reforms is important if Egypt is to create new jobs and improve living standards.

The report said that the WB expects Egypt's economy to grow by 5.5 per cent despite the repercussions of the Russian-Ukrainian crisis. The growth rate expectations for the fiscal year 2021/2222 were in both the April and January 2022 reports where the 5.5 per cent growth rate was compared to October 2021, which recorded 5 per cent growth.

The report stated that the oil-importing countries in the region are expected to achieve a growth rate of 4 per cent for the year 2022. The report also indicated that with the successive effects of the pandemic the growth rate of the Egyptian economy is expected to decrease to 5 per cent in 2022/2023. Nonetheless, it will remain the highest growth rate among the largest economies in the region.

In the report, the WB also asserted that the recent increase in economic activity put Egypt on the right track to achieve growth of up to 5.5 per cent in 2021/2022.  The WB praised the concerted efforts since 2016, along with the measures taken at the beginning of the Corona pandemic and the provision of the support for sectors that enabled the country to face the pandemic flexibly. The WB also commended the several reforms implemented by Egypt to achieve stability in the economy, along with taking steps to enhance the management of its debt, enhance the business environment, and reform the energy sector.

As for the International Monetary Fund's (IMF) vision of Egypt's handling of the crisis, the report pointed out that the crisis in Ukraine posed great challenges to all countries of the world, including Egypt.

According to the report the IMF said that the set of economic measures and policies taken by Egypt would maintain economic growth in the medium term, noting that the measures taken to date have included expanding the scope of social protection and ensuring exchange rate flexibility. The report said that the IMF agreed that there is still a need to continue prudent fiscal and monetary policies so that the stability of the economy could be maintained and to implement a program that supports sustainable growth.

The IMF's director-general, Kristalina Georgieva, welcomed Egypt's quick response to avoid the negative effects of the Ukraine crisis on the balance of payments and the rise in prices of most foodstuffs.

The report stated that Fitch Ratings indicated that the Russian-Ukrainian crisis would lead to an increase in inflationary pressures worldwide and affect global trade flows. It also believes that Egypt's rapid response to these repercussions bodes well for the future of the Egyptian economy. Fitch also emphasised that Egypt is considered an outstanding country among the economies in MENA due to its very small deficit in the petroleum trade balance.

For its part, Goldman Sachs, a global investment bank, expected that raising the interest rate would have strong positive effects on the Egyptian economy, and would increase the attractiveness of the Egyptian market to international investors.

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Sunday, 25 September 2022