Egypt’s economy is expected to be the only one in the Middle East and North Africa (MENA) region to expand in 2020 despite the ongoing COVID-19 crisis, based on the country’s economic resilience and broad-based structural reforms implemented prior to the pandemic, according to Oxford Business Group (OBG).
In its report on Egypt’s response to COVID-19, OBG said that the Egyptian government has adopted decisive measures that balanced the need for containment with the social requirements of maintaining economic growth.
The report was conducted in cooperation with the Commercial International Bank (CIB).
For the banking sector, the report predicted that lower interest rates will likely become the new normal, which will enhance the lending environment.
Low loan leverage and sound deposit levels suggest a stable outlook in the short term, while the growth rate in domestic liquidity continued to increase throughout the pandemic, as did total deposits (including government deposits), according to the report.
The report also said that the actions taken by the Central Bank of Egypt (CBE), along with the increased lending to the private sector in response to the crisis, are expected to contribute to Egypt’s economic rebound over the medium to long term.
Addressing the private sector in Egypt, the report predicted that small and medium-sized enterprises (SMEs) will be a key driver of the private sector’s economic growth, which is needed to support the booming population.
In this regard, the report revealed that the SMEs sector accounts for 33 percent of GDP and 45 percent of the workforce on average in high-income countries, while it represents over 60 percent of GDP and 70 percent of employment in developing economies.
It also added that Egypt has around 2.5 million SMEs, which accounts for 75 percent of the labour force.
Owing to COVID-19, 85 percent of SMEs in the country are estimated to be informal, according to the report.
The report said that Egypt’s banking penetration for the sector remains significantly below the MENA regional average that is estimated at 43.5 percent and the global average of 68.5 percent, despite the CBE directives for commercial banks to increase the number of loans awarded to SMEs to 20 percent of their total portfolio.
The report also expects green finance and green projects to be central to financing in Egypt over the long term driven by the country’s long-term need for sustainable infrastructure and the challenges imposed by the ongoing crisis.
Digitisation will be crucial for Egypt in its recovery, especially since digital financial services have been rapidly expanding, according to the report.
“The rollout of the national prepaid Meeza card seeks to allow citizens to pay all governmental fees and use ATMs, POS machines and e-commerce websites.”
On Egypt’s role in Africa, the report said that growing intra-African trade over recent years has helped provide Egyptian banks with the conditions to expand within the continent.
Following a long-time focus on the domestic market, Egyptian banks are looking to Africa in coordination with the increasing investment and trade ties developing on the continent, the report said.
It also said that demographic growth in Africa, combined with increasing wages and growing demand for infrastructure and services, are creating a cumulative need for financing, which is expected to play a role in economic recovery in the post-pandemic phase.
