The World Bank has joined the list of international institutions that have reduced the expectations for the growth of Egypt's economy this year due to the impact of events in the region on the state's revenues, especially from the Suez Canal. However, the Egyptian government confirmed it was ready to deal with any worsening of the situation in the region and to secure the needs and rights of all citizens. Al-Fiqi said that the government is adopting a "precautionary economy" by preparing several scenarios if the situation in the region worsens. Among these scenarios is setting a cap on public investments to govern public spending and launching a package of tax and investment facilities to encourage increased private sector investments to boost growth rates.

The World Bank has reduced its expectations for the growth of the Egyptian economy, for the third time, from 3.9 percent to 3.5 percent during the current fiscal year. It attributes this to a decline in Egypt's resources from some sectors, most notably the Suez Canal, because of greater risks in the Red Sea. In press statements, Egyptian Prime Minister Mostafa Madbouly said that Egypt has lost more than 60 percent of the expected revenues of the Suez Canal throughout 2024, at a rate of 550-600 million dollars.

The World Bank also estimated that the Suez Canal's revenues would decrease by about half during the current fiscal year to reach USD 4.8 billion, compared to USD 8.8 billion during the last fiscal year. These expectations were preceded by a report by the International Monetary Fund (IMF) that reduced the Egyptian economy's growth expectations by 0.3 percent to 4.1 percent.

This is the third time that the World Bank has reduced its expectations for the growth of the Egyptian economy. The first time was last January when the bank lowered its expectations for the growth of the Egyptian economy for the fiscal year 2024/2025 to 3.9 percent from 4.1 percent before raising its expectations again to 4.2 percent thanks to the Ras Al-Hikma deal, a multimillion-dollar deal that saw the coastal area being sold to the UAE. The World Bank lowered its expectations to 4.1 percent for the second time last July.

The World Bank's estimates are lower than the Egyptian government's fiscal year 2024/202 targets. According to a statement by the Ministry of Finance, the Egyptian government aims to achieve 4 percent growth.

The head of the Planning and Budget Committee in the Egyptian House of Representatives, Fakhry Al-Fiqi, said the main reason the World Bank lowered its expectations for the growth of the Egyptian economy during the current fiscal year 2024/2025 was the decline in the country's revenues from the Suez Canal. These revenues decreased from USD 9.4 billion in 2022/2023 to USD 7.2 billion in the fiscal year 2023/2024.

Al-Fiqi pointed to a rise in interest rates as another reason to lower Egyptian economy growth expectations. However, the rise in interest rates is expected to be temporary.

Al-Fiqi stated that the third reason for the expectation of lower growth rates in Egypt is setting a ceiling for public investments, which gives the private sector a greater opportunity to contribute to the country's GDP. The private sector faces challenges in expanding its investments, most notably the rise in interest rates and the dollar price against the Egyptian pound, which raises the cost of borrowing and importing equipment and machinery from abroad.

According to official data, the total investment volume for the current fiscal year plan has been capped at EGP 1 trillion (USD 20.6 billion). Total private investments amount to EGP 987 billion (USD 20.3 billion).

For her part, Aya Zuhair, head of research at Zilla Capital, said that the World Bank has revised its expectations for the growth rates of the economies of many Middle Eastern countries. These have been affected by geopolitical situations and fluctuations in oil prices.

Zuhair pointed to the impact of geopolitical tensions on the country's revenues from the Suez Canal, a foreign currency source. She also said that the Egyptian economy is witnessing positive factors, including increased remittances from workers abroad and increased direct and indirect foreign investment flows after the US Federal Reserve cut interest rates.

According to data from the Egyptian Central Bank, remittances from Egyptians living abroad amounted to about USD 15.5 billion during the first seven months of this year, including USD 3 billion in July. This is the highest number recorded by remittances from workers abroad during a month.

Photo: The World Bank has joined the list of international institutions that have reduced the expectations for the growth of Egypt's economy this year. by Adobe