January 24, 2019 / 7:13 AM / 6 months ago

Egypt's economy seen growing 5.3 percent in year ending in June: Reuters poll

CAIRO (Reuters) - Egypt’s economy is expected to grow 5.3 percent in the fiscal year that ends in June, according to forecasts economists polled by Reuters, the same view found in a survey three months ago.

FILE PHOTO: People shop at Al Ataba, a popular market in downtown Cairo, Egypt January 15, 2019. REUTERS/Mohamed Abd El Ghany

The economy, with the exception of the oil sector, has struggled to attract foreign investors since the 2011 uprising that unseated Hosni Mubarak.

Egypt’s non-oil private-sector activity shrank for a fourth month in December. Private-sector activity has expanded in only five months over the last three years.

“Medium-term growth remains slightly subdued as the government maintains a strong grip on the economy, but is nonetheless supported by an expected expansion in the infrastructure, manufacturing and tourism sectors,” said Nadene Johnson, an economist at NKC African Economics.

Hoping to bolster investor confidence, Egypt has been implementing tough economic reforms as part of a three-year, $12 billion deal agreed with the International Monetary Fund in November 2016. The reforms include a value-added tax, cuts to energy subsidies and a steep currency devaluation.

The median forecast from 14 economists polled Jan. 8-22 put growth at 5.3 percent in the current 2018/2019 fiscal year and 5.5 percent the following two fiscal years.

Egypt had targeted growth at 5.8 percent in its 2018/2019 fiscal year budget.

“Egypt should enjoy a relatively stable pace of growth over the next couple of years ... but the economy will remain strained by ongoing fiscal consolidation, soft private sector activity and uncertainty in the global economy,” wrote Maya Senussi, senior economist for the Middle East at Oxford Economics.

“That said, we see greater support from public investment this year, reinforced by lower oil prices lowering subsidy spending. Consumers also stand to gain from lower oil prices, while lower interest rates should generally inject some life into the private sector,” she said.

The latest consensus put urban consumer inflation at 15.5 percent in 2018/2019, up from a previous forecast of 14.9 percent. Economists polled expected the rate to fall to 13.1 percent in the 2019/2020 fiscal year and 10.9 percent in the 2020/2021 fiscal year.

Annual urban consumer price inflation fell to 12.0 percent in December from 15.7 percent in November as monthly food prices dropped. Core inflation, which strips out volatile items such as food, rose to 8.30 percent in December from 7.94 percent.

Millions of Egyptians live below the poverty line and struggle to meet basic needs. They have faced rising costs since the pound was floated in November 2016.

“Inflation was revised lower in 2019 thanks to the easing of global oil prices. However, there are some risks to the outlook including further tightening of global conditions (particularly U.S. interest rate tightening); or renewed emerging market turmoil, which could jeopardize capital inflows and weigh on the value of the pound,” Johnson said.

Polling by Md Manzer Hussain, writing by Yousef Saba, editing by Larry King

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