Egypt’s real gross domestic product (GDP) growth is expected to decelerate to 2.8% in the current fiscal year 2023/2024, compared to the 3.8% achieved in 2023 and 6.6%in 2022, the World Bank predicted in April in its latest MENA Economic Update titled “Conflict and Debt in the Middle East and North Africa”.
GDP growth to rebound
However, the World Bank remains optimistic, projecting a rebound in Egypt’s GDP growth to 4.2% in the upcoming fiscal year 2024/2025. This forecast comes after the World Bank downgraded its previous estimate of 3.7% growth for Egypt in 2024 to 3.5% earlier this year.
Additionally, the report highlighted key economic indicators. Egypt’s current account balance is expected to decrease to 3.2% in FY2023/2024 and then to 3.3% in FY2024/2025, compared to the 1.2% recorded in 2023. The fiscal balance deficit is projected to increase to 6.5% in FY2023/2024 and then to 6.4% in FY2024/2025, compared to the 6% deficit in 2023.
The report attributed this deterioration to factors such as a slowing economy, which has led to reduced tax revenue, increased interest payments due to a devalued currency, and monetary tightening.
The Central Bank of Egypt’s (CBE) decision to raise key interest rates and allow the Egyptian pound’s value to be determined by market forces has resulted in a significant depreciation of the currency against the US dollar.
MENA GDP
The MENA Economic Update suggested that the Middle East and North Africa (MENA) region is poised for modest growth in the upcoming years. Real GDP growth in MENA is projected to reach 2.7% in 2024 and 4.2% in 2025, marking a return to the lower growth rates observed before the global pandemic.
Within the MENA region, the report elaborated that the Gulf economies, encompassing Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, are expected to see improved growth rates of 2.8% in 2024 and 4.7% in 2025. This growth is attributed to higher oil output resulting from the phasing out of oil production cuts, as well as robust growth in the non-oil sector driven by diversification efforts and reforms.
Conversely, developing oil-importing countries, including Egypt, are anticipated to witness a decline in growth to 2.5% in 2024, down from the 3.1% recorded in 2023.
It is important to note that the report’s projections assume that the Israel-Palestine conflict will not escalate further. However, if the conflict were to worsen or persist, countries neighboring Gaza could face exacerbated external account deficits due to declining tourism, the report said. Egypt could also be affected, with lower revenues from the Suez Canal resulting from the potential rerouting of shipping activities away from the Red Sea.
