Capital Economics Predicts A 3% Decrease in The Speed of Egyptian Economic Development in 2016

Capital Economics Agency stated on Wednesday that it predicts a 3% decrease in the rate of Egyptian economic development in 2016.

The agency added, in a research memo, a copy of which was received by Mubasher, that 2016 will be another tough year for the Egyptian economy, the size of which is 289.5 billion Dollars, according to estimates by the World Bank, in light of the reduction in the value of the Egyptian pound and due to the current strict financial and monetary policies. This is in addition to the consequences faced by the tourist sector, noting that development should get back on track in 2017.

The report clarified that the Egyptian economy recorded a good performance during the previous year, when the GDP rose by 4.5% during the second quarter, which was slightly better than the average rate recorded since the 2011 revolution, but that is due to a sharp decrease in imports, since the local demand was exceedingly low.
Capital Economics pointed out that the tourist sector is likely to remain stagnant amidst concerns to maintain high security conditions, clarifying that adjustment of the financial situation should continue in order to set a limit to the budget deficit which had reached 11.5% of the domestic product at the end of the previous financial year.

The report predicted the continual decrease in the value of the pound against the Dollar, until it reaches 9.5 Egyptian pounds to the Dollar, which represents a painful situation in the near future. It is also expected that inflation will increase up to a rate of 3.5% of base index, which will put pressure on actual incomes.

Capital Economics stated that in the long-term these conditions will revive economic development during 2017, since the reduced value of the pound should release the restrictions on hard currency, and improve the ability for external competition, thus encouraging foreign investors to return.