Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Egypt economic growth forecasts lowered as Gaza crisis flares: Reuters poll

Published 01/23/2024, 11:19 PM
Updated 01/23/2024, 11:30 PM
© Reuters. FILE PHOTO: People walk on the beach as a container ship crosses the Gulf of Suez towards the Red Sea before entering the Suez Canal, in El Ain El Sokhna in Suez, east of Cairo, Egypt April 24, 2017. REUTERS/Amr Abdallah Dalsh//File Photo
MCO
-

By Patrick Werr

CAIRO (Reuters) - Egyptian economic growth will be slower than previously expected as its pound weakens, inflation cuts into purchasing power and fallout from the Gaza crisis eats into the country's main sources of foreign currency, a Reuters poll showed on Wednesday.

Revenue from the Suez Canal fell 40% in early January after sea attacks by Yemen's Houthis diverted away shipping. The crisis in neighbouring Gaza that started in October has also weakened the tourism outlook.

"Developments over the past month have seen the country being hit hard from various angles and directly to its main revenue generators," Pieter du Preez of Oxford Economics wrote in a client note this week.

Global credit-ratings agency Moody's (NYSE:MCO) last week downgraded its outlook on Egypt's sovereign debt to negative from stable.

A $3 billion financial support package from the International Monetary Fund (IMF) signed in December 2022 faltered after Egypt paused on its pledge to move to a flexible exchange rate regime and sell state assets. An IMF team is now holding talks in Cairo on how to revive and possibly expand the package.

The median forecast in a Reuters poll of 14 economists was for gross domestic product (GDP) growth of 3.5% in the fiscal year that began on July 1, down from a previous forecasts for the same year of 3.9% in October and 4.2% in July.

In 2024/25, growth will climb to 4.15%, the latest poll showed, although this is lower than the 4.50% expected by analysts just three months ago.

The central bank last month estimated the economy had slowed to 2.9% in the second quarter of 2023 from 3.9% in the first quarter.

"Real GDP growth is expected to slow down further during fiscal year 2023/24 before gradually picking up thereafter," the bank's Monetary Policy Committee said in a Dec. 21 statement.

The poll's median currency forecast was for the Egyptian pound to weaken to 40.00 to the dollar by end-June 2024 and 43.00 by end-June 2025.

The central bank has kept the pound fixed at 30.85 to the dollar since March after having allowed it to fall by nearly 50% against the dollar the previous year.

On the black market, the pound has fallen to about 61 to the dollar from 39 before the Israeli campaign against Hamas in Gaza began in October.

© Reuters. FILE PHOTO: People walk on the beach as a container ship crosses the Gulf of Suez towards the Red Sea before entering the Suez Canal, in El Ain El Sokhna in Suez, east of Cairo, Egypt April 24, 2017. REUTERS/Amr Abdallah Dalsh//File Photo

The annual headline inflation rate, at 33.7% in December, has been at record highs since June.

The median forecast for the current financial year was for average inflation to ease to 30.80% before slowing to 18.22% in 2024/25.

(Polling by Veronica Khongwir and Anant Chandak; Writing by Patrick Werr; Editing by Christopher Cushing)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.