Egypt’s economic growth is expected to slow to 5.5% in the current fiscal year, below the government’s target, and 5.8% the following year, a Reuters poll showed, as Cairo nears the end of an IMF-backed economic reform programme.

The forecasts were similar to a Reuters survey of economists released three months ago but fiscal 2019-20 growth was seen lower than the government’s target of 6%.

Prime Minister Mostafa Madbouly said last week Egypt’s gross domestic product (GDP) grew 5.6% in the 2018-19 fiscal year, a bit higher than the 5.5% expected in the April Reuters poll. Barring the oil industry, Egypt’s economy has struggled to attract foreign investors since the 2011 uprising.

Egypt’s non-oil private-sector activity contracted for the second consecutive month in June, according to the Emirates NBD Egypt Purchasing Managers’ Index (PMI). Private-sector activity has expanded in only five months over the last three years.

“Even as leading economic indicators point towards weak consumer spending and stress on local firms, rising investment and government spending are supporting higher economic growth,” said Nadene Johnson, an economist at NKC African Economics. “Medium-term growth prospects remain promising thanks to the natural gas sector and higher investment, while consumption is expected to recover following the completion of inflationary reforms.”

Last month, Egypt introduced its latest round of fuel subsidy cuts, raising prices by 16-30%, as it nears the end of the IMF programme.

Scaling back fuel subsidies that have been a strain on the budget for decades was a key plank of the three-year, $12 billion reform package signed with the International Monetary Fund (IMF) in 2016, as Egypt’s economy struggled to recover from the turmoil that followed the 2011 uprising.

Reuters