Macro Analysis /
Egypt

Egypt: Potential impact of coronavirus on the economy

  • Fiscal deficit to narrow, on lower imports

  • Uncertainties to reduce FPIs, FDIs, remittances and tourism; major sources of USD flows

  • Real economy to react with a lag, GDP growth revised down to 4.5% in FY 19/20 from 5.6%

Al Ahly Pharos Securities Brokerage
30 March 2020

The coronavirus crisis could potentially impact the Egyptian Economy through the following channels: 

Impact on the monetary economy 

  1. Plunge in oil prices to reduce Suez Canal revenues; narrow oil-trade deficit; alleviate fiscal deficit pressure; and weaken remittances. 
  2. GCC economic slowdown to reduce tourism, FDI share and retract FPIs, but narrow the trade deficit.
  3. Weakening global economies to lower trade volumes but narrow trade deficit; reduce Suez Canal and tourism revenues; retract funds from FPIs and FDIs.
  4. BOP net impact: lower tourism, remittances and Suez Canal revenues, with narrower trade deficit; to cause exchange rate depreciation, higher inflation, and monetary policy responses.

Impact on the real economy

  1. Fiscal Sector – Expenses to fall, revenues to fall, treasury yields to rise; and debt service to fall.
  2. Real Sector – Weaker GDP performance, lower PMI and employment.

Download the full report for our in-depth analysis of the impact of coronavirus on the overall economy.