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EBRD lowers expectations of Egypt economy growth

EBRD lowers expectations of Egypt economy growth
Central Bank of Egypt (Photo credit: Arabianeye-Reuters)

Cairo – Mubasher: The European Bank for Reconstruction and Development (EBRD) lowered its expectations for the growth of the Egyptian economy for 2016 to 3.3% from 4.3%.

The bank's previous announcement was made in November 2015.

In a report titled "Regional Economic Prospects", EBRD attributed the lower expectations to retreating foreign currency reserves, which the bank said "have constrained manufacturing activity given its high dependence on imported inputs."

Egypt's foreign reserves dropped from $36 billion in early 2011 to around $16.5 billion in April 2016, prompting the Central Bank of Egypt (CBE) to devalue the Egyptian pound in March by 112 piasters or 13%.

This devaluation in the EGP "should ease foreign exchange and competitiveness pressures," the bank said in its report, adding that tourist arrivals dropped 45% year-on-year in the aftermath of the downing of a Russian airplane over Sinai in October 2015. It is likely that tourist arrivals to Egypt will take some time to recover.

EBRD noted that it expects a continued decline in Suez Canal revenues on the backdrop of slowing global trade.

The Suez Canal Authority announced its revenues in April in Egyptian pounds and not in dollars for the second consecutive month.