02:29 PM
Saturday 04 September 2021
I wrote – Yasmine Selim:
A report by the Economic Research Department at the National Bank of Kuwait said that Egypt succeeded in limiting the negative effects of the Corona virus pandemic by spending on health aspects, taking into account financial sustainability.
The report indicated that the Egyptian economy performed better than expected despite the outbreak of the Covid-19 pandemic, thanks to the Egyptian authorities’ ability to effectively manage the crisis.
The Egyptian economy continues to progress on the right track to recover from the repercussions of the pandemic in general, with the support of the ongoing economic reforms, as the real GDP achieved a remarkable growth of 7.7% on an annual basis in the last quarter of the last fiscal year, after it decreased by 1.7% during the same period in Last year due to restrictions related to Corona.
The report expected that with the easing of precautionary measures recently and the acceleration of the vaccination program, the economy will continue to improve in the coming period.
He said that the growth rate may reach about 5% in the medium term thanks to the authorities’ continuous use of the economic reform program in the absence of any potential threat posed by the emergence of mutated strains of the virus or the exposure of the global economy to a new setback.
The public finance situation improved thanks to the reduction of subsidies and the improvement in public debt revenues, and the government managed to achieve a primary surplus of 1.4% of GDP in the last fiscal year, according to the report.
According to the report, like other countries, Egypt’s debt during the pandemic rose from 84% to 90.6% of GDP in the last fiscal year, due to the unexpected rise in spending on health care.
He added that, on the contrary, most countries have decreased the debt-to-GDP ratio compared to the peak levels recorded before the pandemic, which amounted to 108% in the fiscal year 2016/2017.
The report assumes that the public debt-to-GDP ratio will decrease to about 80% by the end of next June, with the government maintaining its commitment to financial reforms and continued economic growth.
The report pointed out that the public finance situation in Egypt has improved more than expected.
He said that the external sector in Egypt suffered from the deterioration of tourism revenues and affected the pandemic and the restrictions imposed on international travel, which led to a widening of the current account deficit gap.
He added that Egypt witnessed an improvement in terms of net foreign direct investments, remittances of workers abroad and Suez Canal revenues.
Inflation remains low in Egypt despite its recent acceleration, and the report said that inflation levels are expected to rise due to the possibility of the recent rise in fuel prices at the end of July on other factors, as well as on the overall inflation rate for the next quarter.
The report indicated that the banking sector remains resilient despite the Corona pandemic, with the continued improvement of the liquidity situation and the enhancement of depositors’ confidence, supported by the appropriate response of the Central Bank during the Corona pandemic.
The report expected credit growth to remain strong supported by the gradual recovery of the economy and the clear directions provided by stable and consistent monetary policy.
According to the report, Egypt succeeded in establishing a more flexible and balanced economic foundation, which enabled it to manage the coronavirus crisis without disrupting macroeconomic activity and structural reforms or significantly affecting growth.
However, the report that there is uncertainty about the recovery of the global economy and the possibility of the emergence of new waves of HIV cases are among the main risks surrounding the growth prospects in the near term.
He said that the high levels of public debt and the huge financing needs are among the main factors that make Egypt vulnerable to external shocks in the medium and long term.
The government must pursue structural reforms to enable the private sector to play a greater role in driving growth, reducing poverty and creating sustainable job opportunities.
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