Fitch Solutions expected Egypt’s economic growth to remain strong in the upcoming five years, propped by strong investment with consumer mood recovering.
Private consumptions are estimated to propel the growth, along with fixed investment which has grown at the fastest pace in the short-to-medium term.
The coronavirus crisis will likely dampen and delayed positive growth, which was one of pent-up demand that had been unleashed by increased macroeconomic and political stability.
Fitch opined that more structural reforms would be required to maintain the strong growth rates in the long-term. This process may be boosted by the reforms led by the International Monetary Fund (IMF).
Over the long term, government consumption as a share of GDP will likely fall due to the need of coronavirus-related stimuli. Fitch predicted the authorities will be keen to shift resources away from consumption onto capital spending.
Going forward, Fitch predicted that consumer price inflation would gradually slow to an average of 5.4% over the next decade. The prediction is comparable with a peak of 29.6% in 2017 and 9.4% in 2019.
Fitch based this view on the likeness of subsidy cuts to become less frequent, along with the very weak oil price outlook.
Fitch predicted the Central Bank of Egypt (CBE) to keep the overnight lending rate unchanged at 10.25% this year. The bank is likely to return to easing next year with an overnight lending rate by end-2021 at 9.75%.
