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Egypt’s economy to grow 4.7% in FY 2017/18 - NBK

Egypt’s economy to grow 4.7% in FY 2017/18 - NBK
The Egyptian economy has become more competitive on the back of the currency float
NBK
NBKE
-0.26% 19.05 -0.05

Cairo - Mubasher: Egypt’s economic activity maintained bouncing back in the third quarter of 2017 after beginning to turn a corner during the first half of 2017, according to a recent report by the National Bank of Kuwait (NBK).

The Egyptian economy has become more competitive on the back of the currency float, the report added.

The economy kept seeing a robust growth in Q3-17, as growth domestic product (GDP) hiked to 5.2% year-on-year from 2.3% average growth in 2016, bolstered by the private sector which expanded by 5% year-on-year in Q1-17, while the public sector grew by just 2.4%.

The Purchasing Managers’ Index (PMI), which rose to its highest level in two years at 50.7 points in November, carried on improving in Q4-17, implying further growth in GDP, the report noted.

NBK attributed the upward growth trajectory to tourism recovery as the number of visitors to Egypt leaped by 55% year-on-year in Q3-17, pointing out that the tourism component of the production index rose by 15% year-on-year in Q2-17.

Egypt’s average growth in fiscal year (FY) 2017/2018 is still expected to rise to 4.7% from 3.6%, the report mentioned, adding that growth is projected to increase to 5% and 5.5% in FY18/19 and FY19/20, respectively.

Moreover, the value-added tax (VAT) is expected to boost tax revenues by up to 1% of GDP.

The fiscal deficit declined to 10.9% of GDP in FY16/17 from 12.1% in the prior fiscal year, according to the report.

Furthermore, total spending dropped to 25.3% of GDP to-date in FY16/17, its lowest level in six years, while tax receipts accelerated by 33% year-on-year, which in return boosted total revenues to 15.1% of GDP.

NBK forecast imporvement of the North Africa nation's economy to carry on over the coming two fiscal years as spending is brought under control and the government shores up its revenues.

The budget deficit is likely to narrow to 8.5% for FY17/18 before any further improvement to 7.5% and 6.5% in the following two fiscal years, NBK said, adding that gains are expected to come from continued measures to slash the subsidy bill.

“Higher revenues are also expected to be an important source, as tax collection methods improve and the government’s hiking of the VAT rate from 13% to 14% this fiscal year is felt,” the bank continued.

Egypt’s inflation stood at 31% year-on-year in October, the bank alluded, expecting this rate to shrink at 23% by the end of 2017 before easing further to 10% by the end of 2018 and 8% by the end of 2019.

NBK forecasts the Central Bank of Egypt (CBE) to begin cutting rates over the forthcoming months when it is convinced that inflation has come under control.

Tourism receipts surged 17% year-on-year to $1.5 billion in Q2-17 from a year ago, while worker remittances were up 10% year-on-year in 2Q17 to $4.8 billion.

“Foreign reserves have been largely steady, coming in at $36.7 billion or an estimated 8.1 months of imports at the end of November 2017,” the bank said.

Foreign reserves have greatly increased over the last year on the back the CBE’s decisions and multilateral commitments, including loans from the International Monetary Fund (IMF), the report highlighted.