Another growth downgrade: Italy’s Intesa Sanpaolo has cut its 2023 and 2024 growth forecasts for Egypt due to the country’s ongoing economic crisis, the bank said in a res earch note (pdf) last month. The lender now expects the economy to grow at a 3.4% clip this year, down from its 4.1% forecast in June, and 3.9% in 2024, down from 5.5%.

The rationale: “Projections for 2023 real growth were lowered against June’s scenario given the slowdown in government investments and the negative impacts of a high cost of borrowing and shortages in raw materials in the industrial sector,” analyst Samer Halim wrote in the note.

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  • Inflation to rise before it falls: Intesa expects inflation to accelerate to 39.4% by the end of 2023, before falling to 31.3% in 2024. Inflation is not expected to move back to the Central Bank of Egypt’s 7% (± 2 percentage points) target range before 2028.
  • It’s among the lenders expecting a 2023 devaluation: The bank is forecasting the EGP to fall to 38 / USD by the end of 2023 and 40 / USD by the end of next year.

Intesa is the latest to forecast slower growth in Egypt: The European Bank for Reconstruction and Development cut its Egypt growth forecast for 2024 by 0.7 percentage points to 4.5%, citing structural constraints, high inflation, and limited fiscal space. Over the summer, the IMF revised its 2024 growth forecast for Egypt to 4.1%, down from a 5.0% forecast a few months prior, citing the lack of exchange-rate flexibility and the FX crunch, while Morgan Stanley recently lowered its FY 2023-2024 growth forecast to 4.2% from 5.0%.

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