David Butter
The Egyptian government is looking to 2019 as the year in which it will start to realise clear dividends from previously-enacted economic reforms. These have included changes to the petroleum regime that are already yielding benefits in the form of a rapid ramp-up in natural gas production. On the political front, one of the key issues will be whether President Abdel-Fattah el-Sisi prepares the ground to extend his mandate beyond 2022, when his second, and supposedly final, term is scheduled to end.
The $12bn IMF programme that commenced in November 2016 is now in its final year. The main elements have been putting in place a flexible exchange rate system, bringing down the fiscal deficit through increased taxation and cuts in energy subsidies, and seeking to improve the environment for private investment. The programme has also included social protection measures, in particular increases to food subsidies and the development of schemes targeting assistance at vulnerable groups.
The effects of the reforms, both positive and negative, have been evident in Egypt's main economic indicators. Real GDP growth has accelerated from 3–4pc to over 5pc, and the government is aiming for growth of 5.8pc in the fiscal year that ends in June 2019 and for 6.5pc the following year. These targets are achievable, partly thanks to the surge in gas output and the recovery of tourism, but the relatively weak rate of growth in private consumption is likely to persist, reflecting the pernicious impact of high inflation on living standards.
