File picture: Yuri Gripas / Reuters.

INTERNATIONAL – Egypt’s economy is expected to grow 5.9 percent in the year ending in June, the International Monetary Fund said on Tuesday — unchanged from its April forecast but below the government’s target of 6 percent  to 7 percent .

Analysts have hailed Egypt for tough economic reforms tied to a three-year, $12 billion loan programme with the IMF agreed in late 2016, which has been disbursed in full.

The reforms included devaluing the currency by about half, cutting energy subsidies and introducing a value-added tax. Those changes have left many of Egypt’s nearly 100 million citizens struggling to make ends meet.

In its World Economic Outlook, the Fund brought down its 2019/2020 forecast for consumer price inflation to 10 percent  from 12.3 percent six months ago.

Egypt said its economy grew by 5.6 percent  in the 2018/19 year, slightly above the IMF’s estimate of 5.5 percent , unchanged from April.

The World Bank forecast on Thursday that Egypt’s economy would grow by 5.8 percent  this fiscal year and estimated it grew 5.6 percent  in 2018/2019, matching the government’s figure.

The IMF forecast Egypt’s current account deficit would widen to 2.8 percent  of GDP this fiscal year from its 1.7 percent  estimate in April. It also widened its estimate for last year’s current account deficit to 3.1 percent  from 2.4 percent .

The IMF improved its expectations for unemployment in Egypt, predicting it would fall to 7.9% this fiscal year, down from its estimate of 8.3 percent  six months ago. It also estimated unemployment in 2018/19 at 8.6 percent , below its April expectation of 9.6 percent .

“A loss of reform momentum would reduce growth and potential output and put pressure on unemployment, given the fast-increasing labor force,” the IMF said in its final review of Egypt’s reform programme, written in July and released this month.

“The transition to a transparent market-based economy will require further broadening and deepening of reforms and their sustained implementation beyond the current program, particularly regarding long-standing problems of weak governance, rent seeking, vulnerabilities to corruption, and the heavy presence of the state in the economy.”

The IMF said last year that Egypt will have a working age population of 80 million by 2028. Creating jobs for so many people will be a challenge for a country with a notoriously bloated and inefficient public sector, and where the state controls vast swathes of the economy.

Reuters