Cairo - Egypt's economy is set to grow 4.1 percent this financial year, marginally weaker than the previous year and short of the government's own growth expectations, a Reuters poll found.
Egypt has been struggling to revive its economy since a 2011 uprising toppled Hosni Mubarak, causing political and economic turmoil that deterred foreign investors and tourists and put a strain on the country's foreign reserves.
Foreign reserves have been cut by more than half since 2011, falling from $36 billion to $16.44 billion in December.
The government's decision to hold the tightly managed currency flat against the dollar is a troubling development, economists at HSBC wrote in a note to clients.
“The controls have left Egypt with a significant dollar shortage, undermining activity as firms struggle to access imports,” wrote Simon Williams and Razan Nasser. “The FX shortages have also served to discourage investment from home and overseas.”
Economists in the survey expect growth for the financial year 2016/17 to be 3.5 percent and 4.0 percent for 2017/18.
The government said the economy grew around 4.2 percent last year while its 2015/2016 budget projects growth of 5 percent for the financial year ending June.
A poll in October showed analysts expected Egypt's economy to grow 4.3 percent in the year ending June 2016 and for the following two years.
The central bank has been trying to balance the need for economic growth while keeping inflation risks at bay, but in December it raised key interest rates by 50 basis points, citing inflationary pressures. The lending rate hike to 10.25 percent was the first since July 2014.
Analysts in the poll were reluctant to provide forecasts for monetary policy.
Three of five respondents expected the lending rate would stay at its current level across the poll horizon, one said the central bank would continue hiking while one priced in a further 25 basis point hike before the end of the 2016/17 fiscal year.
Before the 2011 uprising, the economy grew about 7 percent annually for several years, but even that pace was barely enough to produce work for the large number of Egyptian youths entering the job market.
Urban consumer inflation was steady at 11.1 percent in December while core inflation, which excludes items such as fruit and vegetables, eased to 7.23 percent.
Analysts raised their inflation forecast to 10.5 percent for the current financial year from 10.1 percent in the last poll. Inflation is expected to ease by June 2017 to 10 percent and to 9.9 percent in 2017/18.
REUTERS