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Egypt’s economy to grow 4.5-5% in Q2: RenCap

Egypt’s economy to grow 4.5-5% in Q2: RenCap

ArabFinance: The Egyptian economy will grow by 4.5-5% in the second quarter (Q2) of 2021 and will continue to gather momentum through the rest of the year, Renaissance Capital economists said during a press briefing.

The investment bank is also maintaining its forecast for 4.2% growth in 2021, which it believes will accelerate to 5% next year.

Anticipated growth will come off the back of recovering tourism, an uptick in portfolio inflows, economic recovery driving imports, continued easing of pandemic restrictions and the vaccination program.

The strong quarterly figures are also partly due to the low base effect that saw the economy contract by 1.7% in Q2 2020.

Tourism will once again start making a positive contribution to growth over the quarter.

May 2021 saw 1.5 million passengers pass through Egypt’s airports,  a more than 20% Year on Year (YoY) increase from May 2020.

Meanwhile, tourist numbers in May 2021 are still a third below what was seen pre-pandemic, which suggests the sector is still in recovery.

RenCap is expecting a current account deficit of around 4% of the gross domestic product (GDP) for 2021, up from 2020’s 3.1%.

Egypt’s high-interest rates will continue to be a significant draw for portfolio investment, RenCap said.

RenCap expects the policy lending rate to remain at 9.25% through the end of 2022.

On the other hand, Global increases in food prices do bring the risk of short-term inflation, which was a little concerning earlier in the year, as Egypt imports much of its food.

Food inflation for June 2021 stood at just over 3% YoY, and will likely continue ticking up. While non-food inflation has been much softer, helping keep headline inflation relatively contained at 4.9%

 

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