IMF holds Egypt growth outlook:The IMF left its 2023 growth forecast for Egypt unchanged in its latest projections released alongside its updated World Economic Outlook (pdf). The Fund is still expecting growth to slow to 3.7% this year from 6.7% in 2022, a forecast initially made in April.

2024 growth downgraded: The Fund now expects the economy to expand at a 4.1% clip next year, down from its 5.0% forecast in April. “This lower growth in 2024 is mostly because of the lack of [foreign exchange rate] flexibility and the shortages that have developed in the FX market in Egypt, which is making it difficult for imports to happen. It also has dampened investor confidence,” Petya Brooks, the deputy director of the IMF’s research department, told reporters yesterday.

The IMF now expects inflation to remain 30%+ through 2024: The IMF is now projecting inflation to average 24.4% this year a nd rise further to 32% in 2024. This is a significant shift from its April forecast which saw inflation averaging 21.6% this year and slowing to 18.0% in 2024. “A big part of that is because of the depreciation of the currency and all of this underpinning our advice to have policies which restore the macroeconomic balances,” Brooks said. “Perhaps the most important thing is to allow more flexibility in the FX market.”

REMEMBER- Inflation accelerated at a record pace in June as the impact of multiple currency devaluations combined with higher seasonal demand to send food prices soaring. Annual urban rate of inflation rose to 35.7% y-o-y during the month.

THE GLOBAL OUTLOOK-

IMF gives slight upgrade to global forecast: The IMF revised upwards its 2023 global growth outlook by 0.2 percentage points to 3.0% from the 2.8% April forecast in the report. Despite the revised figures, the forecast is significantly below 2022’s 3.5% growth rate.

No cause for celebration: The 2023 forecast “remains weak by historical standards,” the IMF wrote in the report. “Many challenges still cloud the horizon, and it is too early to celebrate,” IMF chief economist Pierre-Olivier Gourinchas wrote in an accompanying blog post (pdf), noting that tighter financial conditions and higher inflation are weighing on global economic activity. “Stronger growth and lower inflation than expected are welcome news, suggesting the global economy is headed in the right direction. Yet, while some adverse risks have moderated, the balance remains tilted to the downside,” he added.

Inflation is coming down, slowly: The fund is now forecasting global headline inflation to fall to 6.8% in 2023 from 8.7% in 2022. During its April forecast, the fund had predicted global inflation to fall to 7.0%. “Monetary policy tightening is expected to gradually dampen inflation, but a central driver of the disinflation projected for 2023 is declining international commodity prices,” the IMF wrote. Core inflation — which excludes volatile food and energy prices — “is proving more persistent than projected,” it said, penciling in a 6.0% core rate for 2023, down from 6.5% last year.

Sharp Saudi slowdown drags down MENA outlook: The IMF trimmed its MENA growth outlook by 0.5 percentage points, and now expects growth to slow to 2.6% this year from 5.4% in 2022. Growth estimates for 2024 were also downgraded to 3.2% from 3.4% in April.

Why is Saudi going to grow slower? The IMF attributed the region’s growth decline to a “steeper-than-expected growth slowdown” in Saudi Arabia, where GDP is expected to fall from 8.7% in 2022 to 1.9% this year due to its cuts to oil production.

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