Egypt’s economy set for a rebound in 2022
Net foreign assets in banks rise by 8 percent to $23.54 billion in Q1
According to data issued by the Central Bank of Egypt (CBE), foreign assets in the country’s banks rose 8 percent to $23.54 billion by the end of March, compared to $21.73 billion in December 2020. Foreign assets refer to the value of overseas assets owned by a nation, minus the value of its domestic assets that are owned by foreigners, adjusted for changes in valuation and exchange rates. According to the CBE, during the first quarter of 2021 foreign commitments by Egyptian banks increased by about $1.907 billion to a record $19.885 billion, compared to $17.977 billion in December 2020. Egypt’s gross domestic product (GDP) growth will begin to rebound from 2022 on its foreign reserve buffers and debt market access, ratings agency S&P Global said, as it affirmed the country’s credit rating at B/B with a stable outlook.
Real GDP growth will average 5.3 percent between 2022 and 2024, S&P forecasts, due to higher public and private investment. That compares to an expected 2.5 percent growth in 2021.
Still, S&P’s rating is constrained by Egypt’s wide fiscal deficit, large public debt and low income levels.
But ongoing fiscal and economic reforms present strong mediumterm growth prospects for Egypt, and recovering growth and lower domestic interest rates will put the debt ratio back on a downward path, the new report said.
“We expect Egypt’s
foreign exchange reserves and access to domestic and external debt markets will allow it to cover higher external financing needs and upcoming maturities,” the report added.
Egypt’s main sources of foreign exchange will remain under pressure as tourism and Suez Canal receipts still struggle amid the pandemic, the report warned. Last week, Egypt forecast that it will generate $6 billion in income from tourism activities in 2021/2022 as the tourism sector started to gradually recover. Egypt’s Minister of Planning and Economic Development Hala El-Saeed the government expects to gain $6 billion from the Suez Canal in 2021/2022, in addition to increasing foreign investment rates to $7.4 billion during the fiscal year.
Regarding the main objectives of the 2021/2022 development plan, the minister forecast a growth rate of 2.8 percent in the current fiscal year, while the government aims to achieve growth of 5.4 percent in the next fiscal year. She added that the government is aiming for inflation to be 5.6 percent in the current fiscal year and 6 percent the following year.
The minister pointed out that the current fiscal year is expected to end with an average rate of 7.5 percent, adding that the government aims to gradually reduce this to 7.3 percent in the next fiscal year.