The Central Bank of Egypt has forecast a recovery in the country’s Gross Domestic Product (GDP) in the near future. This follows a slowdown in real GDP growth rates caused by the Suez Canal crisis and its impact on the services sector.
In a statement released on Thursday, the Central Bank’s Monetary Policy Committee detailed the reasons behind its decision to maintain overnight deposit and lending rates. The committee noted that domestically, real GDP growth slowed to 2.2% in the first quarter of 2024 compared to 2.3% in the fourth quarter of 2023.
This slowdown was attributed to a decline in the public sector’s contribution to economic activity due to the impact of the Suez Canal crisis on the services sector. Additionally, the recent increase in private sector economic activity was insufficient to offset this decline.
The committee mentioned that preliminary indicators for the second quarter of 2024 suggest that real GDP growth has begun to recover and is expected to gradually improve starting from the 2024/2025 fiscal year, following a noticeable slowdown during the 2023/2024 fiscal year.
However, real economic activity remains below its potential, supporting the downward trend in inflation in the coming period. This is expected to continue until it approaches its maximum capacity in the medium term.
Regarding the unemployment rate, the committee noted that it declined to 6.5% in the second quarter of 2024, compared to 6.7% in the first quarter of 2024, primarily driven by an increase in the number of employed individuals in the agriculture sector.
According to the statement, inflationary pressures continued to ease with the gradual dissipation of the effects of previous shocks. The annual general inflation rate declined to 25.7% and the core inflation rate to 24.4% in July 2024, for the fifth consecutive month. Despite persistent high inflation in non-food goods, the significant decline in the annual inflation rate of food items continues to drive overall inflation downward.
In its meeting today, Thursday, the Monetary Policy Committee of the Central Bank of Egypt decided to maintain the overnight deposit and lending rates and the central bank’s main operation rate at 27.25%, 28.25%, and 27.75%, respectively.
The committee also decided to maintain the credit and discount rate at 27.75%. This decision reflects the latest developments and expectations at both the global and domestic levels since the previous meeting of the Monetary Policy Committee.
