The Economic Pulse

The Ministry of Planning and Economic Development recently announced new data on Egypt's macroeconomic performance for the fiscal year 2023-24, highlighting a mix of achievements and challenges. The country faced external pressures, including geopolitical tensions and supply chain disruptions, along with domestic contractionary policies aimed at stabilizing the economy. Despite these obstacles, key sectors such as tourism, foreign direct investment (FDI), and technology demonstrated resilience and growth, providing optimism for Egypt’s future economic prospects.

The IMF's latest country report on Egypt, released in August, deemed the country's performance for the third review as "satisfactory," with Egypt meeting half of the structural benchmarks, including a flexible exchange rate and increased tax and budget transparency. However, the country fell short in areas like timely publishing of annual audits and implementing quarterly fuel increases, prompting the IMF to adjust some benchmarks and extend deadlines.

Egypt has made substantial progress in addressing its economic challenges, underlined by strategic steps in fiscal consolidation and commitments to economic enhancement. This is evident from the substantial developments across the political and economic landscape. Notably, the country has made significant strides in debt management, paying $25 billion since March 2024, which represents 7% of its GDP.

Egypt is making significant strides in overcoming its economic challenges. The government's dedication to these reforms is evident in the ongoing review of Egypt's USD 8 billion loan program, which underscores the positive contributions of the Ras El Hekma sale proceeds and state ownership policies. This review is anticipated to conclude by June 15, paving the way for the release of the third tranche of USD 820 million.

The Egyptian economy experienced a notable shift in its Balance of Payments (BOP), registering a deficit of US$ 409.6 million, contrasting sharply with the previous fiscal year's surplus of US$ 599.1 million. This change was primarily driven by a significant increase in the current account deficit, which reached US$ 9.6 billion, up from US$ 1.8 billion previously. Factors contributing to this surge included a rise in the trade deficit, declining remittances from Egyptians working abroad, and widening investment income deficit....

President Sisi's new term as President of Egypt has begun with a strong emphasis on implementing strategies to fortify the economy, enhance private sector participation, and achieve sustainable growth. Central to these efforts is the prioritization of key sectors such as agriculture, industry, information technology, and tourism. The government's ambitious goal is to achieve annual growth rates ranging between 6-8% by the end of President Sisi's third term...

The near-term macro-economic outlook indicates positive momentum in the market and a brief window for currency adjustment. The Egyptian government has secured a much-needed influx of foreign currency through a planned USD 35 billion investment from an Abu Dhabi-backed group, specifically in a major real estate project on Egypt's North (Mediterranean) coast at Ras El Hekma. This investment is expected to provide ample liquidity to cover Egypt's financing gap over the next four years. Coupled with the government's imminent closure of USD 12 billion in financing from the IMF and other development partners, this coordinated effort is poised to significantly strengthen the foreign exchange liquidity positions at the Central Bank of Egypt.

Egypt's economic landscape reveals a tapestry of significant developments, responding dynamically to both internal and external factors. The Central Bank of Egypt's strategic response to a drop in monthly inflation, down to 33.7% annually, includes a substantial 200 basis points increase in key policy rates. While this bold move aims to tackle inflation, concerns loom over potential impacts on purchasing power and the pricing dynamics of goods and services.

In 2023, Egypt confronted formidable economic challenges exacerbated by the repercussions of the Ukrainian war, leading to a substantial capital flight exceeding US$20 billion in portfolio investments. In the wake of this event resulted in a prolonged deficit in the capital account, posing a serious threat to the Egyptian economy amid increasing external debt obligations.

This month has proven to be a dynamic period for Egypt's economic landscape, featuring a combination of positive and challenging developments across various sectors.

October has been an extraordinary month filled with major events and critical policy developments, both in Egypt and across the region. These developments reflect a diverse spectrum of challenges and opportunities, collectively shaping the economic landscape.

The economic outlook for September 2023 reveals a complex mix of challenges, reforms, and investor responses. It included notable developments that raised questions and concerns about the country's economic stability and the progress of its reform efforts. Specifically, the International Monetary Fund (IMF) postponed the review of Egypt's $3 billion loan for the second time in a row; sparking a stir over Egypt's fiscal standing and its alignment with international expectations.