IMF Draws Egypt's Economy Features Amid Corona Repercussions

The International Monetary Fund (IMF) drew the features of the Egyptian economy in light of the implications of the coronavirus outbreak in 4 main points; the most prominent of which is lowering the economic growth outlook to 2%.

Meantime, the Egyptian Ministry of Health announced that the total number of coronavirus registered cases reached 2,350 cases, including 589 cases that have been cured and discharged from quarantine, and 178 deaths.

The IMF reduced its expectations for the growth of the Egyptian economy, nevertheless, it remained the only Arab country with economic growth in the Arab region.

The Fund expected Egypt to be the only Arab country to achieve economic growth during the current year, however, it lowered its expectations for economic growth to 2% in 2020, 2.8% in 2021, compared to 5.6% in 2019.

On the other hand, the IMF predicts an economic recession in Middle East region, as it expected the growth of the Saudi economy to record -2.3%, the UAE by about -3.5%, and Kuwait by -1.1%, in addition to all the developed economies, which will observe a recession on a wider scale due to the great lockdown.

Earlier, Hala El-Saed, the Egyptian Minister of Planning, said that the repercussions of the crisis , which is expected to continue for several months, will affect the growth rates of the H2 FY 2019-20.

At the end of last month, the Minister of Planning said that it was intended to achieve a growth rate by the end of the current fiscal year of 5.6%, but it is expected to reach 5.1% in the best cases with the slowdown in the growth of the third and fourth quarters to 5.2% and 4%, respectively.

Inflation

With regard to inflation, the International Monetary Fund raised its expectations for the inflation rate in Egypt during 2020 to 9.9%, indicating that the inflation rate is expected to slow slightly in 2021 to 9.7% percent, compared to 10.4% in 2019.

Last October, the Fund expected, in the fifth review report, that the inflation rate in Egypt would decrease to 7.4% and 7% for the FY 2020/21 and 2021/22.

At the beginning of this month, the Central Agency for Public Mobilization and Statistics said that the annual core inflation rate increased by 0.6% during March 2020, on a monthly basis.

Egypt has witnessed increases in the prices of vegetables, meat and some food commodities during the recent period, due to fears of the coronavirus outbreak, the imposition of curfew, and the increased exploitation of some retailers, which prompted the government to intervene in controlling the markets, as well as providing products to reduce any price hike.

The Minister of Planning said that she expects an increase in the rate of inflation if the virus outbreak continues until December 2020 to reach 9.8%, due to the increased demand for some products, including medical supplies and detergents and the limited increase in production capacity in the short term.

The central bank, however, aims to bring the annual inflation rate to 9% with (±) 3% on average, during Q4 2020.

Account deficit

On the current account deficit, the Fund indicated that it is expected to reach 4.2% of GDP in the current year, compared to 3.6% in the previous one and the IMF expected it to continue increasing to reach 4.5% in 2021.

Unemployment

The Fund expected the unemployment rate in Egypt to hit 10.3% this year, compared to 8.6% last year, and to continue to rise to 11.6% next year.

Regarding the Egyptian government's expectations of the unemployment, it intends to reduce rates to 8.5% by the end of 2020/21 if the crisis conclude by the end of the current fiscal year, however, if the crisis persists, it is expected to negatively affect unemployment rates.