The International Monetary Fund (IMF) has raised its projections for Egypt’s FY2020/2021 real GDP growth up 2 percent to 2.8 percent, matching the government’s conservative outlook and citing milder-than-expected contraction during the coronavirus pandemic.

This will make Egypt likely to be one of the few countries to record positive GDP growth in 2021.

Egypt’s economy took a heavy hit last year due to COVID-19, with a big toll on the tourism sector and worker remittances.

“The growth impact of the COVID-19 crisis has so far been less severe than expected, as strong consumption helped offset weak tourism and investment,” the IMF said in the first review of Egypt’s latest stand-by arrangement.

The IMF also notes that they expect modest recovery in all sectors in Egypt except tourism, which is expected to see a much more protracted recovery.

The attributed this to travel disruptions happening worldwide, which are expected to continue well into 2021, as well as Egypt’s stronger base in FY2020/2021 that implies a less sharp growth for FY2021/2022 than previously projected (revised to 5.5 percent from 6.5 percent).

 “With the growing numbers of countries experiencing a second wave of the pandemic, and the numbers rising in Egypt as well, uncertainty remains high, particularly around the evenness and pace of global recovery. Recent capital inflows have somewhat offset lower tourism revenues, but the repricing of risk assets by financial markets could produce a new bout of portfolio outflows while stable remittance flows may not prove durable. Sharp increases in unemployment, poverty, and inequality could also undermine public support for the economic program, while materialization of contingent liabilities could adversely affect the debt trajectory,” said IMF.

Sustained progress in moving towards longer-term debt issuance will support the reduction of gross financing needs, and improve public debt’s risk profile by lowering rollover risks, they added, stressing that continued progress on fiscal reforms continues to be important.

This is to provide additional space for high priority spending on health and education and speeding up public expenditure review to boost social protection.

The IMF also supported Egypt’s ongoing calculation of tax expenditures on corporate income tax and encouraged the authorities to extend the assessment to the rest of the tax system. The new customs law should help shorten delays in cross-border trade, which limits investment.

It added that sustained progress on structural and governance reforms is essential to foster higher, greener, and more inclusive private-sector-led growth, including continued focus on enhancing the transparency of state-owned enterprises, ensuring a level playing field for all economic agents, and removing bureaucratic obstacles to private sector development.

In an attached addendum to the IMF’s report, the government stated that, despite the pandemic’s effects and restrictions, the impact on tourism, manufacturing and construction was partly offset by modest growth in most other sectors.

At the end of 2020, Egypt’s Prime Minister Mostafa Madbouly confirmed that the Egyptian government has faced many challenges during COVID-19 crisis, and was able to make achievements by adopting a proactive methodology in dealing with the pandemic and limiting its health, social and economic repercussions.

Egypt in March announced a 100 billion Egyptian pound ($6.39 billion) stimulus package, including compensation for day laborers affected by lockdown measures and support for the tourism sector.