The pandemic’s silver lining in Egypt

 

The pandemic’s silver lining in Egypt 

By Ahmed Kamel

The durability of economic growth in Egypt will be determined by a set of factors, comprising domestic and global elements. However, the local aggregate demand will have the final say in the coming months. As world countries try to make their way out of the economic mayhem caused by the Covid-19 pandemic, a second wave of the deadly virus seems to inevitable with leading economies partially locked down again.

A global recession has already cast a shadow on emerging economies, raising a number of questions regarding the countries, which posted positive growth rates despite the coronavirus repercussions. Specifically, to what extent could this recession impact the nation’s economic outlook in Egypt?

Earlier this month, S&P Global Ratings said the pandemic had disrupted the nation’s economic and fiscal trajectories, and elevated external risks. Definitely, the pandemic has created many challenges on the fiscal and monetary levels. However, it has opened up opportunities with the local growth rate maintained above two per cent despite the global recession.

After eight months of anti-pandemic fiscal and monetary measures, one can dare say reining in the budgetary and trade balance deficits has proved indeed that the coronavirus cloud has a silver lining.

The growth rate may keep its pace at 2.5 per cent gross domestic product (GDP) in the coming few months despite uncertainty over the pandemic’s second wave.  

The state budget deficit fell to 2.6 per cent of GDP in the first four months (July-October) of the fiscal year 2020/21, down from 3.1 per cent a year earlier, according to Finance Ministry data. Hopefully, the budget deficit may likely decline to 7.5 per cent of GDP in the fiscal year 2020/21, year-on-year, down from 7.9 per cent in the previous year.  

The trade balance deficit plunged 20.5 per cent to $3.02 billion in August 2020, compared to $3.8 billion the same month last year, according to data from the state-run Central Agency for Public Mobilization and Statistics (CAPMAS).

Easing trade balance deficit has been a direct outcome of a slowdown in global trade incurred by the coronavirus. The non-oil imports fell by 13.2 per cent to $45.55 billion between January and September 2020, down from $52.47 billion on the same period in 2019, according to CAPMAS.  

Moreover, the International Monetary Fund (IMF) expects the state’s total public revenues to surge by 20 per cent in the 2020/21 fiscal year. The Fund forecast the state’s revenues to take an uptrend until the 2024/25 fiscal year.   

By the fourth quarter of the 2020/21 fiscal year, the growth rate may exceed 3.5 per cent of GDP as the pandemic’s jitters calm down.  However, in the long run, there will be three basic challenges facing Egypt in the future: how to take advantage of the rapidly growing population, modernize the economy and provide a sustainable social safety net to protect the vulnerable.  

In the post-pandemic era, the government, civil society and the private sector should work on finding answers to one simple question: How can this country economically maximize its gains from the available resources?