Growth, foreign income sources and government debt were adversely impacted by COVID-19, but are starting to improve due to favorable base effects, recovering global conditions, and easing restrictions. Sustaining the nascent uptick requires expediting vaccination, especially with risks from the Delta variant. Strengthening fiscal management to enhance social protection and human development spending whilst pushing ahead with structural reforms are crucial to unleash the private sector¡¯s potential for export-oriented growth and job-creation, and ensure an inclusive recovery path.
Recent Developments
Growth declined from 3.6% in FY2019/2020 to 3.3% in FY2020/2021 (July 1, 2020¡ªJune 30, 2021), affected by the ongoing impact of COVID-19. However, exposed sectors that were contracting since the beginning of the pandemic (tourism, manufacturing, extractives, and Suez Canal) started rebounding during April¡ªJune 2021 (Q4-FY2020/2021); in part reflecting base effects, easing restrictions and the gradual resumption of economic activity, international travel and trade. Unemployment declined to 7.3% by Q4-FY2020/2021, from the 9.6% peak a year earlier at the height of the COVID-shock. Yet, labor force participation and employment rates remain low at 41.9% and 39% of the working-age population, further hindering poverty reduction.
Outlook
The outlook remains uncertain given the slow vaccination rate, the emergence of the Delta-variant and the resurgence of COVID-19 cases, which could threaten the recovery, especially for Egypt¡¯s exposed sectors. Nevertheless, ; supported by favorable base effects and global growth. Domestic economic activity is expected to be supported by the gradual return of tourists (especially with the resumption of flights from Russia after a 6-year hiatus), continued growth in the ICT sector, an uptick in gas extractives and exports, in addition to the public investments.