The Economic Pulse

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.

Amidst these challenges, several mitigating factors provided relief. The non-oil trade balance deficit improved, Suez Canal transit receipts surged, and tourism revenues increased. Additionally, the capital and financial account recorded a net inflow of US$ 8.4 billion, driven by significant foreign direct investment (FDI) inflows.

The draft budgets for the upcoming fiscal year unveiled significant projections and allocations across key economic indicators. Economic growth is anticipated to accelerate to 4.2%, while a decrease in headline inflation to 17.9% is expected. Revenue projections indicate an increase, primarily from taxes, while substantial allocations are directed towards interest payments, social support, and investments.

However, (IMF) has maintained its growth forecast for Egypt for the current fiscal year at 3.0% in its latest World Economic Outlook, signaling a level of stability after successive downgrades in previous reports. This forecast contrasts with the recent revision by the World Bank, which lowered its growth outlook to 2.8%, citing challenges such as sluggish industrial sector performance, high inflation, and regional conflicts affecting key revenue streams like Suez Canal revenues and tourism receipts.

Inflation remains a pressing concern, with the IMF revising its forecast for consumer price increases to 33.3% year-on-year on average for the current fiscal year. This represents a slight upward revision from the Fund's previous prediction of 33.3% and a notable increase from the 24.4% recorded in the previous fiscal year.