Egypt has been on a steady course of recovery from last year’s recession, but struggling tourism and a slow vaccine rollout remain key threats, Capital Economics said in a report today.
The economic research company nevertheless predicts that the Egyptian economy will expand by 4.5 percent this fiscal year and 6.5 percent in 2022/23.
The company added this will leave the Egyptian economy about 2.5 percent below the pre-pandemic level by 30 June 2023.
A possible continuance of tight fiscal policy looms over this, it added.
The firm pointed out that the recovery with 1.6 percent growth last year was led by the construction sector, adding since then the recovery has continued but at a slower rate.
Low vaccination rates pose a significant threat however, with only 9.2 percent of Egyptians receiving at least the first dose of vaccination.
This has left the country vulnerable to fresh outbreaks and plausible domestic restrictions which would setback the recovery, the company said.
Another caveat for the recovery is the slowly-healing tourism sector. Tourism usually accounts for 3 percent of Egypt’s GDP, but its share has dropped significantly in the first quarter of this year to reach only 0.9 percent. The company predicts this trend to continue, adding that “it is still likely to be several years before arrivals return to pre-pandemic levels.”
Capital Economics also pointed to the tight fiscal policy carried out by the Egyptian government throughout the pandemic, which narrowed down budget deficits and maintained primary budget surpluses.
The company expects this policy to continue in the short to medium term.
The hydrocarbon sector could still stimulate GDP by about 1 percent as natural gas production reached record highs earlier this year, it said.