Egypt's economic recovery continues, Fitch Solutions said in a recent research note, projecting the country's economic growth to pick up to 4.2 per cent in the fiscal year 2024/2025. The growth is buoyed by higher investment, a recovery in the manufacturing sector and a normalisation of traffic through the Suez Canal in case of the Israeli war in Gaza ending in the second half of 2024. "We maintain our view that economic growth will pick up to 4.2 per cent in FY2024/25, driven by higher investment, a recovery in the manufacturing sector and a normalisation of traffic through the Suez Canal (assuming the war in Gaza ends in H2 2024)." Ramona Moubarak, Director of MENA Country Risk at Fitch Solutions, said in a LinkedIn post. However, Moubarak said: "The hydrocarbons sector and the elevated cost of living will prevent a stronger rebound in economic growth." "The recovery is fragile and continues to be dependent on the Egyptian authorities' remaining compliant with the IMF (International Monetary Fund) programme and on contained geopolitical risks." she noted. Moubarak highlighted that remittance flows from Egyptians working abroad surged to $7.5 billion in the fourth quarter of the 2023/2024 fiscal year. Egypt's tourism sector demonstrated resilience amid increasing geopolitical risks, Fitch official noted, further supporting economic stability. BMI Report CBE's policies to curb inflation Meanwhile, Fitch Solutions' BMI report expects the Central Bank of Egypt (CBE) to maintain a strict monetary policy throughout 2024. For inflation, Fitch expected it to decline to under 20 percent by February 2025, potentially allowing the CBE to start easing monetary policy either before February 2025 or immediately after. Additionally, Fitch projected the CBE to cut rates by 1,200 basis points later that year, in line with global easing trends. Current Account Deficit The Fitch report also expects a reduction in Egypt's current account deficit to 4.2 percent of GDP, or $13.2 billion, in the 2024/2025 fiscal year, citing increased remittances and a growing services surplus. Foreign Exchange Reserves Moreover, the report sees Egypt's net foreign exchange reserves, which had reached a record $46.48 billion in July 2024, to continue rising. EGP vs USD The Egyptian pound's exchange rate is projected to trend downward, ranging between EGP 47.9 – 49.5 against the US dollar for the rest of the year, with the ongoing war in Gaza seen to add pressure on the pound and limit its recovery. Looking ahead, Fitch expected the currency to depreciate by 7 percent against the dollar, with inflation falling to an average of 18.1 percent the following year. Fitch expects the Egyptian pound to hit around 57.63 against the USD by 2033. Attribution: Ramona Moubarak's post on LinkedIn
