Capital Economics, a research firm, has projected Wednesday that Egypt's Gross Domestic Product (GDP) growth will accelerate in the upcoming fiscal years, outstripping consensus forecasts.
The firm anticipates a rise to 5.0% in the current fiscal year, with a further increase to 5.3% in FY2025/26.
Egypt's economy has faced challenges over the past year, grappling with a devalued currency, soaring inflation rates, and stringent fiscal and monetary policies. However, recent indicators suggest that the nation is on the path to economic recovery, with expectations of stronger GDP growth than other analysts predict.
The outlook for Egypt's economy is becoming increasingly positive. Factors contributing to this optimistic view include the ceasefire between Israel and Hamas and the Houthi's commitment to reducing hostilities in the Red Sea (NYSE:SE), which are likely to enhance activities through the Suez Canal, thereby benefiting Egypt's trade and logistics sectors. Additionally, as security concerns diminish, the country should see an uptick in tourist numbers.
Another beneficial development for Egypt's economy is the depreciation of the Egyptian pound, which has enhanced the country's external competitiveness. Evidence from the Purchasing Managers' Index (PMI) suggests that this devaluation is bolstering external demand. Furthermore, inflation is expected to drop significantly in the near future, from an annual rate of 24.1% in December to below 10%. This anticipated decrease should alleviate the financial burden on households by increasing their real income, Capital Economics said.
The expected slowdown in inflation is also likely to lead to cuts in interest rates, which should encourage consumer spending and stimulate domestic credit demand.
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