A Reuters survey indicated that Egypt's economic growth will be slower than previously anticipated, while the Egyptian pound is expected to decline slightly more than earlier forecasts. The average expectations in the survey, conducted from July 10 to 18 and including 13 economists, predict a growth rate of 4.2% for the fiscal year starting July 1, slightly down from an earlier April forecast of 4.5%. The latest survey indicates that in the fiscal year 2024-2025, growth will recover to 4.8%.
Egyptian Finance Minister Mohamed Maait stated on Wednesday that preliminary data showed real GDP growth of 4.2% during 2022-2023. The average expectations from the survey suggested that the pound will drop to 34.8 against the dollar by the end of this year, slightly lower than previous predictions of a decline to 34 pounds. Economists expect the pound to fall to 36.95 against the dollar by the end of 2024 and to 38.90 the following year.
The currency has lost about 50% of its value against the dollar after a series of sharp devaluations since March 2022, and it continues to face pressures in the black market. The annual inflation rate in Egyptian cities rose to a record high of 35.7% in June, surpassing previous highs recorded in 2017 following a sharp currency devaluation under a prior IMF program.
The average forecasts from 11 economists consulted by Reuters indicate that inflation in Egyptian cities will decrease to 22% by the end of the current fiscal year in June 2024 and then fall to 13% the following year. In the previous April survey, economists had estimated inflation in Egyptian cities at 20.9% for the fiscal year 2023-2024 and 9.3% for 2024-2025.
Bankers and analysts state that an increase in the money supply has been utilized to cover the growing budget deficit, which raises concerns about even higher inflation and additional pressures on the pound. Egypt has long suffered from a shortage of foreign currency, record inflation levels, and an increasing debt burden, despite continued steady economic growth amidst shocks from the COVID-19 pandemic and the Ukrainian war.
In December, the government agreed to a $3 billion loan program with the IMF, with commitments to adopt a flexible exchange rate system, reduce the state's role in the economy, and enhance the private sector. However, the first review of the program has been delayed as the exchange rate has remained stable at around 30.85 pounds to the dollar since March.
