IMF Lowers Projections for Egypt Real GDP Growth by 0.3% in FY23/24, FY24/25

Doaa A. Moneim, Ahram Online  

Tuesday 16 Jul 2024

The International Monetary Fund has revised down its projection for Egypt’s real GDP growth by 0.3 percent in both the recently concluded FY2023/2024 and the current FY2024/2025 to 2.7 percent and 4.1 percent, respectively, according to an update to its World Economic Outlook (WEO) report released on Tuesday.

In April, the IMF maintained its projection for Egypt’s real GDP growth in 2024 at 3 percent, declining by 0.8 percent compared to the estimation of 2023.

It also expected the country’s GDP growth to rebound to 4.4 percent in 2025.

The IMF’s Executive Board is scheduled to discuss the third review of Egypt’s $8 billion loan programme on 29 July. The review, once approved, will unlock $820 million as a third tranche of the loan.

Middle East, Central Asia

On a regional level, the report has also downgraded its projections for the Middle East and Central Asia region by 0.4 percent and 0.2 percent for both 2024 and 2025.

For the emerging markets and developing economies, the report revised up its projections for their real GDP growth powered by stronger activity in Asia, particularly China and India.

Global Growth

Globally, the IMF maintained its projections for the global real GDP growth compared to April’s forecasts at 3.2 percent in 2024 and 3.3 percent in 2025.

“However, varied momentum in activity at the turn of the year has somewhat narrowed the output divergence across economies as cyclical factors wane and activity becomes better aligned with its potential,” read the report.

The report added that services price inflation is holding up progress on disinflation, which is complicating monetary policy normalization.

Consequently, the upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates in the context of escalating trade tensions and increased policy uncertainty, according to the report.

Commodities Prices

The report also expected the global prices of nonfuel commodities to rise by five percent in 2024.

It also expected the price of energy commodities to drop by about 4.6 percent in 2024, less than projected in the April WEO.

The report attributed the new energy price projections to the increased oil prices from deep supply cuts by the Organization of the Petroleum Exporting Countries (OPEC+), including Russia and other non-OPEC oil exporters, and reduced price pressure from the Middle East conflict.

Interest Rates 

On the monetary policy level, the report expected the interest rates to decline in the second half of 2024, with divergence in the pace of normalization reflecting varied inflation circumstances.

The report predicted the world trade growth to rebound by about 3.25 percent (Y-o-Y) in 2024–2025 while expecting the uptick in the first quarter of 2023 to cool as manufacturing remains subdued.

“Although cross-border trade restrictions have surged, harming trade between geopolitically distant blocs, the global trade-to-GDP ratio is expected to remain stable in the projection”, said the report.

Global Inflation

The report also projected that global inflation to maintain its downturn path. In this respect, the report expected the disinflation to slow down in the advanced economies in 2024 and 2025, as inflation in prices for services is expected to be more persistent and commodity prices higher.

Otherwise, the gradual cooling of labour markets, together with an anticipated decline in energy prices, should bring headline inflation back to target by the end of 2025, according to the report.

Inflation is expected to remain higher in emerging markets and developing economies and to fall more slowly than in advanced economies.

However, partly thanks to falling energy prices, inflation is already close to prepandemic levels for the median emerging market and developing economy, said the report.