Following the successful completion of an IMF program from 2016-2019, Egypt was one of the fastest growing emerging markets prior to the COVID-19 outbreak. However, the significant domestic and global disruptions from the pandemic have hurt growth and shifted policy priorities. The COVID-19 pandemic caused an unprecedented decline in international trade (Suez Canal revenues), loss of tourism activity (8% of GDP) and the drying up of remittance inflows that hurts private consumption. The IMF estimates real GDP grew 3.5% in 2020, down from the 5.4% annual average in 2018 and 2019.
The IMF forecasts expects growth to average more than 5% per annum from 2022-25, as domestic and external demand recovers and international tourism resumes in coming years. The implementation of a new 12-month US$5.2 billion IMF program in June 2020 provides an anchor for ongoing economic and fiscal reform and will support government liquidity and external finances. Sustained progress on structural and governance reforms is needed to support robust growth over the medium term, including continued focus on enhancing the transparency of state-owned enterprises, ensuring a level playing field for all businesses, and removing obstacles to private sector development. Continued strong policy implementation would help maintain investor confidence moving forward.
Downside risks dominate the outlook, including the potential for resurgence of COVID-19 infections that could weigh significantly on domestic output. High public debt (estimated at around 93% of GDP in June 2021) and large financing needs leave Egypt vulnerable to volatility in global financial conditions.
GDP per capita dropped considerably through 2016-19 because of the depreciation of the Egyptian pound. Beyond the pandemic, the resumption of growth around 5% per annum should push per capita incomes above US$4,000 in 2025 from an estimated US$3,500 in 2020.