By Nibal Zgheib
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 May 13.
The latest edition of the EBRD Regional Economic Prospects report sees growth in Egypt in 2020 of 0.5 per cent, compared with 5.6 per cent in 2019. It predicts a rebound to 5.2 per cent 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 per cent in 2020 before rebounding with growth of 4.8 per cent in 2021.
Jordan, Morocco 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 per cent in 2020.
Economies across the EBRD regions may contract on average by 3.5 per cent this year, with a rebound of 4.8 per cent 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.