World Economy

Egypt Growth Rate to Accelerate

Egypt Growth Rate to AccelerateEgypt Growth Rate to Accelerate

Egypt’s economic growth rate is set to accelerate to 4.5% in the current fiscal year, higher than in recent years but lower than the government projects, a Reuters poll forecast on Thursday.

After more than four years of sluggish growth brought on by political upheaval, Egypt’s economy has recently shown signs of revival. The country’s 2015/2016 budget projects growth of 5%, better than the poll, Reuters reported.

Growth reached 3% in the third quarter of the 2014/2015 fiscal year, which ended in March, compared with 2.5% in the same period a year earlier, the planning ministry said in July.

“We think Egypt’s economic recovery remains on track, despite some softness in early 2015. Public-sector investment initiatives are an important driver of our outlook this year and next,” said Nemr Kanafani at National Bank of Kuwait. “Still, economic growth has been hampered by bottlenecks in the energy sector and availability of foreign currency.”

Before the 2011 uprising, the economy grew about 7% annually for several years. But even that pace was barely enough to produce work for the large number of Egyptian youths entering the job market.

Unemployment among those 15 to 29 years old was 26% in the second quarter of 2015 and 44.6% for those holding university degrees, the statistics agency said. The overall unemployment rate dipped to 12.7% in the second quarter from 13.3% in the same period last year.


 Seeks Investments

Billions of dollars in aid from Persian Gulf Arab states have kept Egypt’s economy afloat for the past two years, but that aid is not expected to continue.

The government has said it is now looking to its Persian Gulf Arab partners for new investments rather than aid as it balances restoring growth with inflation and a swelling budget deficit.

Analysts polled lowered their forecasts for the consumer price index for the 2014/2015 fiscal year to 10.4% from 10.8% in the previous poll. They expected it to ease to 9.5% in 2015/2016.

Egypt’s inflation rates dropped markedly in July as food prices and the effects of removing energy subsidies the year before wore off, the central bank said earlier this month.

Urban consumer inflation fell to 8.4% in July from 11.4% in June. Core annual inflation dropped to 6.495 from 8.07% the previous month.

Some analysts have said lower inflation rates will give the central bank the freedom to cut key rates and thereby stimulate investment and growth.

Only a couple of poll respondents had a view on the central bank’s likely moves but they said it was likely to be downwards. The Egyptian pound is also expected to weaken over the next few years.