October 9, 2019 / 10:00 PM / 5 days ago

CORRECTED-World Bank sees Egypt economy growing 5.8% in 2019/20

(Corrects government’s targeted growth in first paragraph)

By Yousef Saba

CAIRO, Oct 10 (Reuters) - The World Bank forecast on Thursday that Egypt’s economy would grow by 5.8% this fiscal year, lower than the government’s target of 6-7% but in line with the bank’s expectation six months ago.

The World Bank inched up its growth estimate for Egypt’s gross domestic product (GDP) in the last fiscal year to 5.6% from 5.5%, matching the government’s figure. Egypt’s fiscal year starts on July 1.

“Egypt is sustaining its robust growth, fiscal outturns are improving, and external accounts are stabilizing at broadly favorable levels,” the institution said in a country note accompanying its regional economic update.

The bank expects growth to rise to 6% in the fiscal year 2020/2021, assuming that macroeconomic reforms continue and the business environment improves.

The gas, tourism, wholesale and retail trade, real estate and construction sectors have been the main drivers of growth, the note said. Net exports of goods and services inched up, private investment increased and unemployment decreased.

However, 39% of the working age population remains unemployed, it noted, “indicating relatively weak private sector job-creation”.

Rabah Arezki, World Bank chief economist for the Middle East and North Africa, said Egypt needed to “level the playing field” between the public and private sectors, especially when it came to access to credit.

Credit extended to private enterprise was only 22% of total domestic credit in fiscal year 2018/2019, the note said.

“It is important for Egypt to consider the importance of competitive neutrality as a tool to catalyse a genuine private sector development,” Arezki told reporters on a conference call on Wednesday.

Analysts have hailed a range of positive economic data in Egypt, including falling inflation, improving primary and budget balances, a strengthening currency and decreasing debt.

“However, non-oil exports remain sluggish,” the note said. “FDI also remained modest and predominantly directed to hydrocarbons.”

Egypt is at the end of a three-year economic reform programme tied to a $12 billion loan from the International Monetary Fund, which has been disbursed in full.

Egyptians have complained that they have not felt the benefits of improving economic indicators.

Millions live in poverty, and many more have struggled to get by after the government devalued the Egyptian pound by about half in 2016, slashed energy subsidies and introduced a value-added tax. (Reporting by Yousef Saba Editing by Ulf Laessing and Gareth Jones)

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