Egypt’s growth to slow sharply in 2020 because of coronavirus pandemic

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Egypt’s growth to slow sharply in 2020 because of coronavirus pandemic

  • Egypt’s GDP growth falls to 0.5 percent in 2020 due to coronavirus pandemic
  • The economy has seen avoiding contraction with 5.2 percent rebound in 2021
  • Large public construction projects and boom in the telecommunications sector supporting the growth

Egypt’s economy will slow sharply this year because of the impact of the coronavirus but will avoid a recession, according to the latest forecast by the European Bank for Reconstruction and Development (EBRD) published today.

The latest edition of the EBRD Regional Economic Prospects report sees growth in Egypt in 2020 of 0.5 percent, compared with 5.6 percent in 2019. It predicts a rebound to 5.2 percent in 2021.

The report says the deceleration led by the Covid-19 pandemic reflects a slowdown in the tourism sector, disruptions in global value chains and a slowdown in demand from trading partners and in foreign direct investment.

However, large public construction projects and the boom in the telecommunications sector have so far been factors supporting growth.

The main risks to the outlook arise from the need for a tougher lockdown if the spread of Covid-19 accelerates and from the negative outlook in Egypt’s main trading partners.

In the EBRD southern and eastern Mediterranean region, the negative impact of the coronavirus is expected to be seen in the tourism sector, a decline in domestic demand due to containment measures, a fall in demand from the main trading partners, and a slowdown in foreign direct investment.

On average, the economies of the region are expected to shrink by 0.8 percent in 2020 before rebounding with a growth of 4.8 percent in 2021.

JordanMorocco, and Tunisia are expected to contract this year. Lebanon, which had already fallen into recession in 2018 and 2019, is likely to see an especially sharp fall of 11 percent in 2020.

Economies across the EBRD regions may contract on average by 3.5 percent this year, with a rebound of 4.8 percent possible in 2021, the report said, warning that the projections are subject to “unprecedented uncertainty”.

The report assumes a modest impact of the crisis on the long‐term trajectory of economic output, with growth resuming towards the end of the third quarter, but potentially significant longer-term economic, political, and social effects.

“If social distancing remains in place for much longer than anticipated, the recession may be much deeper, with the 2019 levels of output per capita not attained again for years to come,” the report said.

Across the EBRD regions, containment measures have affected domestic demand and supply. External shocks include a sharp drop in commodity prices, weighing on commodity exporters, disruption to global value chains, a collapse in tourism, and a drop in remittances.

The EBRD invests in emerging economies from central and eastern Europe through to Central Asia and the Middle East and North Africa.  

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