Egypt’s Economy Seen Just Meeting 2013/14 Growth Target

Egypt’s economy will grow 2.1 per cent this fiscal year, the lower end of the government’s targeted range, according to economists polled by Reuters, who raised their forecasts from a quarter ago.

Street violence and political turmoil since an uprising toppled autocrat Hosni Mubarak in 2011 have hammered the economy of 85 million people and hurt its chances of recovery as foreign investors and tourists have fled.

The consensus of 10 economists polled by Reuters over the past two weeks was for growth of 2.1 per cent in the fiscal year to the end of June 2014. That is slightly higher than the two per cent forecast given by a Reuters poll conducted in January.

The Egyptian government is targeting growth of two to 2.5 per cent this fiscal year.

The survey suggested growth would accelerate to 3.2 per cent in the year to June 2015, within range of the government’s forecast of three to 3.4 per cent, but slightly below the 3.3 per cent predicted in a Reuters poll in January.

Egypt’s economy grew 2.1 per cent in the year to end-June 2013.

Supported by more than $12 billion in aid from Gulf countries, Saudi Arabia, the United Arab Emirates and Kuwait, Egypt has launched two stimulus packages of around 30 billion Egyptian pounds ($4.3 billion) apiece.

The government is under pressure to cut energy and food subsidies which eat up a quarter of the state’s budget and contributed to a swelling deficit that reached around 14 per cent of GDP last fiscal year.

The country’s foreign reserves have also come under pressure as the country has been running down its hard currency reserves to prop up the Egyptian pound. Reserves stood at $17.4 billion in March against around $36 billion before the 2011 uprising.

The poll also predicted inflation would reach 10 per cent by the end of the fiscal year, and 9.7 per cent by end-June 2015.

Annual inflation reached its highest rate in nearly four years in November but has been falling back since then.

Urban consumer inflation stood at 9.8 per cent annually in March, unchanged from the previous month. Core inflation stood at 9.9 per cent in the same month from 9.7 per cent in February.