Egypt’s economy exceeds expectation despite pandemic

Egypt’s economy exceeds expectation despite pandemic
Students are being transported by their family members on motorcycles during the first day of school, following months of closure due to the coronavirus disease (COVID-19) outbreak in the Giza suburb of Awsim, Egypt October 18, 2020. (Reuters)
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Updated 19 October 2020

Egypt’s economy exceeds expectation despite pandemic

Egypt’s economy exceeds expectation despite pandemic
  • The IMF also expects a decline in the overall deficit of GDP to 5.2 percent during 2022-23

CAIRO: Egyptian Finance Minister Mohamed Maait said on Sunday that the financial performance of the Egyptian economy during the coronavirus disease (COVID-19) pandemic exceeded expectations, according to the International Monetary Fund’s (IMF) testimony in its Global Economic Outlook report for October 2020.

In an official statement, he said the economic reforms adopted by President Abdel Fattah El-Sisi had strengthened the Egyptian economy and made it resilient in the face of internal and external challenges.

He said much of that was due to the flexible handling of the pandemic, as the state adopted a proactive policy of allocating 2 percent of its gross domestic product (GDP) to support the most vulnerable economic sectors and groups. Steps were taken in a way that contributed to mitigating the shock and supported the national economy, he said.

The minister said the IMF expected the Egyptian economy to rapidly recover in the medium term and for the country to achieve growth rates higher than those prior to the pandemic.

The IMF also expects a decline in the overall deficit of GDP to 5.2 percent during 2022-23 and 3.8 percent by the 2024-25 fiscal year, reflecting the ability of Egyptian financial policies to deal positively and effectively with local and international variables.

“According to the estimates of the IMF, the state budget, despite the pandemic, will achieve a primary surplus of 0.4 percent of GDP during the current fiscal year, which will rise to 2.1 percent during 2022-23, and the trend will continue at a sustainable rate up to 2 percent on average until 2025,” Maait said.

The finance minister said the IMF expected Egypt to increase total state revenues during the current fiscal by 20 percent, compared to 19.2 percent in the previous year, continuing until the fiscal year 2024-25.

Public expenditures are also expected to decrease to 25.4 percent in the current fiscal year, compared to 28.4 percent last year.

Despite the IMF report indicating a state of ambiguity about the outlook for the global economy, the Egyptian economy’s outlook remained optimistic, Maait said, as the IMF has raised its estimate of the growth rate to 3.5 percent instead of 2 percent during the last fiscal year.

He pointed out that the state’s general budget recorded a slight initial surplus of 100 million Egyptian pounds ($6.39 million) during the first quarter of the current fiscal year, despite the repercussions of the pandemic, meeting the needs of the health sector, all budgetary bodies, greatly increasing government investments and paying pension fund dues.

He said the annual growth rate of revenues rose to 18.4 percent during July and September 2020, despite the continuing negative effects of the pandemic on economic activity, while the annual growth rate of expenditures reached 11 percent due to the increase in government investment allocations, the provision of support allocations and social protection programs, and increased spending on health and education.

China economy grows in 2020 as rebound from coronavirus gains

China economy grows in 2020 as rebound from coronavirus gains
Updated 18 January 2021

China economy grows in 2020 as rebound from coronavirus gains

China economy grows in 2020 as rebound from coronavirus gains
  • Growth in the three months ending in December rose to 6.5 percent over a year earlier
  • China’s quick recovery brought it closer to matching the US in economic output

BEIJING: China eked out 2.3 percent economic growth in 2020, likely becoming the only major economy to expand as shops and factories reopened relatively early from a shutdown to fight the coronavirus while the United States, Japan and Europe struggled with rising infections.
Growth in the three months ending in December rose to 6.5 percent over a year earlier as consumers returned to shopping malls, restaurants and cinemas, official data showed Monday. That was up from the previous quarter’s 4.9 percent and stronger than many forecasters expected.
In early 2020, activity contracted by 6.8 percent in the first quarter as the ruling Communist Party took the then-unprecedented step of shutting down most of its economy to fight the virus. The following quarter, China became the first major country to grow again with a 3.2 percent expansion after the party declared victory over the virus in March and allowed factories, shops and offices to reopen.
Restaurants are filling up while cinemas and retailers struggle to lure customers back. Crowds are thin at shopping malls, where guards check visitors for signs of the disease’s tell-tale fever.
Domestic tourism is reviving, though authorities have urged the public to stay home during the Lunar New Year holiday in February, normally the busiest travel season, in response to a spate of new infections in some Chinese cities.
Exports have been boosted by demand for Chinese-made masks and other medical goods.
The growing momentum “reflected improving private consumption expenditure as well as buoyant net exports,” said Rajiv Biswas of IHS Markit in a report. He said China is likely to be the only major economy to grow in 2020 while developed countries and most major emerging markets were in recession.
The economy “recovered steadily” and “living standards were ensured forcefully,” the National Bureau of Statistics said in a statement. It said the ruling party’s development goals were “accomplished better than expectation” but gave no details.
2020 was China’s weakest growth in decades and below 1990’s 3.9 percent following the crackdown on the Tiananmen Square pro-democracy movement, which led to China’s international isolation.
Despite growth for the year, “it is too early to conclude that this is a full recovery,” said Iris Pang of ING in a report. “External demand has not yet fully recovered. This is a big hurdle.”
Exporters and high-tech manufacturers face uncertainty about how President-elect Joseph Biden will handle conflicts with Beijing over trade, technology and security. His predecessor, Donald Trump, hurt exporters by hiking tariffs on Chinese goods and manufacturers including telecom equipment giant Huawei by imposing curbs on access to US components and technology.
“We expect the newly elected US government will continue most of the current policies on China, at least for the first quarter,” Pang said.
The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8 percent.
China’s quick recovery brought it closer to matching the United States in economic output.
Total activity in 2020 was 102 trillion yuan ($15.6 trillion), according to the government. That is about 75 percent the size of the $20.8 trillion forecast by the IMF for the US economy, which is expected to shrink by 4.3 percent from 2019. The IMF estimates China will be about 90 percent of the size of the US economy by 2025, though with more than four times as many people average income will be lower.
Exports rose 3.6 percent last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.
Retail spending contracted by 3.9 percent over 2019 but gained 4.6 percent in December over a year earlier as demand revived. Consumer spending recovered to above the previous year’s levels in the quarter ending in September.
Online sales of consumer goods rose 14.8 percent as millions of families who were ordered to stay home shifted to buying groceries and clothing on the Internet.
Factory output rose 2.8 percent over 2019. Activity accelerated toward the end of the year. Production rose 7.3 percent in December.
Despite travel controls imposed for some areas after new cases flared this month most of the country is unaffected.
Still, the government’s appeal to the public to avoid traditional Lunar New Year gatherings and travel might dent spending on tourism, gifts and restaurants.
Other activity might increase, however, if farms, factories and traders keep operating over the holiday, said Chaoping Zhu of JP Morgan Asset Management in a report.
“Unusually high growth rates in this quarter are likely to be seen,” said Zhu.