Group B Assignment #2

Egyptian real GDP growth rate analysis 2018/2021Assignment

Briefly analyze the rate of growth of Egyptian real GDP during the
period 2018 /2020. (ie before & after Coronavirus).
You can add some projections regarding 2021.
You can enrich your assignment with charts & tables (identify the
source).
At the end state your main references.

On February 2019, IMF board completed Egypt economic fourth review,

reports shows that Egypt macroeconomic remains favourable supported by
strong actions & policies conducted by the implemented fascial polices that
lead to narrowing current account deficit with the tourism rebound,
unemployment rate decreased to its latest since 2011, public debt to GDP
ratio decreased.
Shown efforts on controlling inflation rate & enhancing exchange rate
flexibility.
2018 added a 2% surplus to the GDP achieving total 5.5% to the 3 years
GDP.
Tight policy along with the automatic fuel indexation policy targeting
efficient energy use will help creating space for high priority health &
education spending.

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2018
35 7
30 5.9 6
25 5
20 4
15 3
10 2
5 1
0 0
2015 2016 2017 proj 2017 real 2018 proj 2018 real 2019

Consumer prices (end of period) Consumer prices (period average)

Real GDP (market prices)

Reports confirms the policies taken success on increasing the GDP and
decreasing inflation rates with better-projected values for 2019.

Key Issues
 Egypt’s macroeconomic situation has improved markedly since the
initiation of the authorities’ reform program in November 2016.
 The external environment has shifted in recent months, posing new
policy challenges.
 The outlook remains favorable, provided policies agreed under the
program are implemented, but the balance of risks has shifted.

Surplus of 0.2 percent of GDP in 2017/18,1 representing a 2 percent

improvement over 2016/17, as planned, which, together with robust

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Group B Assignment #2

nominal GDP growth, lowered general government gross debt from 103
percent to 93 percent in a single year.

Despite large capital withdrawals, the Egyptian pound stayed stable versus
the dollar through mid-January.
In December, the CBE's international reserves totalled $42 billion, which
was enough to cover six months' worth of imports.

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In December 2019, a lockdown in Wuhan and other cities in Hubei province

failed to contain the outbreak, and it spread to other parts of mainland
China and around the world.
On 30 January 2020, the World Health Organization (WHO) declared a
Public Health Emergency of International Concern, and on 11 March 2020,
it declared a pandemic. Since 2021, virus variants have emerged and
become dominant in many countries, with the Delta, Alpha, and Beta
variants being the most virulent.
As of 5 October 2021, more than 235 million cases and 4.81 million deaths
had been confirmed, making it one of the deadliest pandemics in history.

The pandemic has caused severe global social and economic disruption,
including the largest global recession since the Great Depression of the
1930s.
It has resulted in widespread supply shortages, worsened by panic buying,
agricultural disruption, food shortages, and lower pollutant emissions.
Numerous educational institutions and public areas partially or completely
closed.
Misinformation has spread on social media and in the mainstream media,
escalating political tensions. The pandemic has raised issues of racial and
geographic discrimination, health equity, and the balance of public health
imperatives.

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Egypt responded to the COVID-19 crisis with timely and prudent fiscal and
monetary easing, which helped mitigate the health and social consequences
while preserving economic stability, debt sustainability, and investor
confidence.
With global uncertainty and Egypt's high public debt and gross financing
needs remaining risks to the outlook, near-term fiscal and monetary policies
should continue to support the recovery while maintaining macroeconomic
stability.

Egypt entered the COVID-19 crisis with significant buffers resulting from
reforms implemented since 2016. In the face of unprecedented domestic and
global uncertainty, the authorities struck a balance between ensuring
targeted spending to protect necessary health and social expenditures and
maintaining fiscal sustainability while rebuilding international reserves.
Growth is expected to be 2.8 percent in FY2020/21 and 5.2 percent in
FY2021/22, but the outlook is clouded by uncertainty, and Egypt remains
vulnerable to shocks due to its high public debt and gross financing needs.

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2020
16 6
14
5
12
4
10
8 3
6
2
4
1
2
0 0
2018/19 2019/20 2020/21 2021/22 2022/23

Inflation (%, end of period) Inflation (%, period average)

Real GDP growth (%)

GDP was affected by the COVID-19, the projected value for 2020 was 5.9%
but it decreased to 2.2% with a projection to increase to 5.2% IN 2021.
The success to keep the GDP on the positive state reflects the success of the
taken monetary & fiscal policies and proper action plan followed.

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The CBE supported the exchange rate early in the COVID-19 crisis, which
remained stable from mid-March until mid-May 2020. While the currency
rate fell slightly in June, it has been steadily increasing since then, owing in
part to a significant renewal of portfolio inflows. It is about equivalent to
prices prevailing in early March 2020, before the COVID-19 issue worsened,
at around EGP 15.7 per dollar.

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GDP
7

0
2018/19 2019/20 2020/21 2021/22 2022/23

Real GDP growth (%) (2018) Real GDP growth (%) (2020)

The graph shows the Lucas wedge & Okun gap for Egypt performance if it
completed on the projected plan based on 2018 figures and the COVID-19
effect.
Although there was an effect, on the performance but Egypt, taken actions
enabled keeping the positive GDP values and promising projected GDP.

Egypt's Human Development Index (HDI) increased to 0.707 in 2019 from

0.701 in 2018, keeping its global position of 116 out of 189 nations and
remaining in the high human development category. Egypt's HDI is now
greater than the Arab average for the first time.

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References

 https://en.wikipedia.org/wiki/COVID-19_pandemic
 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?context
ual=region&end=2020&locations=EG&start=2020&view=bar
 https://www.imf.org/en/Publications/CR/Issues/2021/07/22/Arab-
Republic-of-Egypt-2021-Article-IV-Consultation-Second-Review-
Under-the-Stand-By-462545
 https://www.imf.org/en/Publications/CR/Issues/2019/04/05/Arab-
Republic-of-Egypt-Fourth-Review-Under-the-Extended-Arrangement-
Under-the-Extended-Fund-46738
 http://hdr.undp.org/sites/default/files/Country-Profiles/EGY.pdf

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