Cairo – Mubasher: Egypt's economic prospects are believed to be negatively impacted by import controls and inflation resulting from the devaluation of the Egyptian pound, according to data and analytics firm GlobalData.
These factors are likely to affect domestic demand and investment, which obstruct the overall economic prospects of the country.
In this regard, the Arab Republic's economy is set to retreat to 4% in 2023 from 6.6% in 2022.
GlobalData’s latest report highlighted that the Egyptian pound experienced three devaluations in 2022 and remained under pressure amid a shortage of US dollars.
In order to control inflation, the central bank of Egypt (CBE) raised interest rates on four occasions last year, amounting to a total increase of 800 basis points.
The most significant hike of 500 basis points took place in the fourth quarter (Q4) of 2022. In March 2023, the CBE announced an additional interest rate increase of 200 basis points during its meeting.
Maheshwari Bandari, Economic Research Analyst at GlobalData, commented: “Increase in interest rates has raised the burden of servicing government debt. Gulf allies now demand significant economic reforms as a condition for providing aid, a departure from their previous unconditional support.”
“The government's privatization efforts to tackle the debt crisis have encountered obstacles, and the protracted crisis may have far-reaching economic and political implications, potentially exacerbating poverty levels,” Bandari added.
He mentioned: “The combination of factors, including currency devaluation and supply disruption, is predicted to result in a substantial increase in the inflation rate from 13.9% in 2022 to 24.4% in 2023, which is expected to impact the domestic demand.”
“Consequently, household consumption expenditure is projected to experience slower growth of 3.5% in 2023 compared to 6.3% in 2022,” the economic analyst concluded.
In December 2022, the IMF approved a $3 billion loan to back Egypt's struggling economy. However, the loan is conditional on Egypt deploying economic reforms and adopting a flexible exchange rate within the next four years.
