Expectations are high that 2018 will be the year the Egyptian economy begins to take off. 2017 was a year for laying the groundwork to spur economic growth as the government continued the reform programme it launched in late 2016 with the blessings and financial support of the International Monetary Fund (IMF). Observers believe the foundations laid in 2017 should begin to attract investments, domestic and foreign, and accordingly increase production, create jobs and boost growth. The numbers are mostly positive. Foreign reserves surpassed the $37 billion mark, higher than 2011 levels, which had so far been the benchmark. And though critics lament that the increase is mostly due to debt, experts say it was inevitable to make sure the economy and banking sectors are in good shape to attract investment. 2017 closed off on other good news. The trade deficit shrank by 26 per cent according to preliminary results released by the Ministry of Trade and Industry, as exports grew by 10 per cent to reach $22.4 compared to $20.4, while imports shrank by 15 per cent from $66 billion to $56 billion in the first 11 months of 2017. These figures reflect the effect of the devaluation of the Egyptian pound in encouraging import substitution and boosting the competitiveness of Egyptian exports. While it is a good start, more needs to be done to boost exports to increase foreign currency flows. Meanwhile the IMF has given another stamp of approval on the reform programme being executed. In its second review of the Extended Fund Facility (EFF) with Egypt, the IMF executive board said Egypt's reform programme is showing welcome signs of stabilisation with GDP growth recovering, inflation moderating, fiscal consolidation on track and international reserves at their highest level since 2011. And it commended the authorities for their commitment to a floating exchange rate regime. The IMF expects Egypt's economic growth to reach 5.5 per cent in the fiscal year 2018/19. The positive review gives the green light for the release of some $2 billion, the third tranche of Egypt's three-year $12 billion EFF. Hope is pinned on a continued and steady improvement in Egypt's main hard currency sources. Tourism has gradually regained momentum and the return of Russian tourism is expected to give it the needed boost. Foreign direct investment was up $1 billion last year to around $8 billion. Forecasts are it will reach $10 billion this year. The biggest boost could possibly be from the Zohr natural gas field that started production as the year was signing off. The huge Zohr natural gas field was operational with initial production of 350 million cubic feet per day. Daily output is expected to increase to a billion cubic feet in June 2018 and 2.7 billion by the end of 2019. Located in the deep waters of the Mediterranean, with 30 trillion cubic feet of reserves, the field is expected to render Egypt self-sufficient in natural gas by the second half of 2018. This discovery will cut the import bill in 2018 by $180 million monthly and $2 billion annually. Inflation, which has haunted Egyptians since the floatation of the currency, is expected to cool off as well. However, prices will never return to pre-floatation levels. But despite improvements on the back of expected tourism revenues and savings in natural gas bills, the government should not lose focus on what is important. While immense progress has been achieved on shaping up macroeconomic indicators, work should continue in streamlining regulations, creating a friendlier business environment, stimulating economic growth and job creation and addressing issues of social justice.
