Egypt's real economic growth is forecast to reach 4.3 per cent in the current fiscal year, which ends in June 2015. This would be double the average growth of two per cent last year, said a recent report by the World Bank. The report, “Egypt Economic Monitor: Paving the Way for a Sustained Recovery”, said that the growth would be driven by “strong private consumption due to resilient remittances, higher wages to civil servants, and contained food inflation. Investments are expected to also contribute strongly,” it said. In addition, the report said that “accelerated public infrastructure spending, the gradual restoration of confidence especially after the March 2015 Economic Conference, and an ambitious plan to pursue large projects and improve the business environment could all help crowd-in private investment.” It projected that growth could continue to increase to around five per cent by fiscal year 2017, “provided that Egypt's long-standing structural problems — a cumbersome business environment and rigid labour market conditions — are addressed.” The report said that economic activity was expected to be broad-based, with strong recovery by key sectors such as tourism and manufacturing. On the fiscal front, it said that the overall budget deficit was expected to narrow to 10 per cent of GDP by 2017, given that the government will gradually streamline energy subsidies, introduce the Value Added Tax (VAT) and a new mining law, and enhance social spending and meet constitutional expenditure pledges. In order to sustain and enhance the economic recovery, the report said “improved security conditions and steadfast reform implementation” were needed. It said that despite the government's “ambitious” plans to streamline fiscal policy, “the budget deficit and debt aggregates will remain high and unsustainable.” It warned of “policy slippages,” saying that some details and the exact timing of announced reform policies such as investment promotion measures and tax reforms “are still missing and implementation capacity remains a concern.” The report added that “sustaining the reform pace requires efficient and well-targeted safety nets, which might take time to build,” commenting that “there is significant uncertainty regarding the financing of the announced mega-projects, and the potential contingent liabilities that may arise.”
