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OECD forecasts and recommendations to support the economy

26/02/2024

·         OECD forecasts and recommendations to support the economy

·          The Organization for Economic Co-operation and Development (OECD) expects Egypt's economic growth to slow to 3.2 percent in FY23/24 – from 3.8 percent last fiscal year – as inflationary pressures continue to weigh on consumption. The OECD also expects growth to rise to 4.4 percent in FY24/25 and 5.1 percent in FY25/26 provided inflation eases.

·         It also predicted that the public debt-to-GDP ratio would decline to 92 percent in FY23/24, and then decline further to 86.9 percent and 80.7 percent in the following two fiscal years.

·         It expects the  current account deficit to narrow to 0.8% of GDP in FY2024/2023 and FY2025/24, and then to 0.7% in 2026/2025.

·         The budget deficit will widen to 7.8 percent of GDP in the current fiscal year, before shrinking to 7 percent and 6.5 percent in the following two fiscal years.

·         Finally,  annual inflation will average 32% in the current fiscal year, before declining to 15.9% in FY24/25 and 7.5% in FY25/26.

 

 

The OECD made a number of recommendations to support the economy , including:

·         Continue tightening monetary policy to stimulate consumption and boost growth.

·         Strengthen fiscal consolidation efforts The  government's recently announced public spending cuts should coincide with a comprehensive review of public investment projects.

·         Enhancing private sector activity by reducing regulatory barriers – such as those that exist when entering the market – and reducing the presence of state-owned enterprises will lead to a level playing field, as well as greater transparency in the  government's privatization program in the selection of assets to be sold and their timelines.

·         Creating more flexible labor markets This entails simplifying employment regulations, lowering income taxes to stimulate the creation of higher quality jobs and reducing contribution rates to social insurance – a major driver of informal employment and the consequent lack of social protection for workers. The government should also expand the establishment of childcare facilities to encourage greater female participation in the labor force, which currently stands at 12.7 percent. (OECD, Enterprise)

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