Egypt's living standards will come under more pressure

Significance

The target is highly optimistic. A recent upturn in headline growth reflects improved terms of trade and better performance in export-oriented sectors, notably tourism and hydrocarbons. Living standards for most Egyptians are facing severe pressure because of the surge in annual inflation, which now stands above 18%.

Impacts

• The government will try to present the relatively high headline rate of GDP growth as a sign of the underlying strength of the economy.
• Some sectors, notably tourism, telecoms, natural gas and the Suez Canal, are performing well, but overall domestic demand is weak.
• The erosion of living standards will breed resentment, but any protests will be heavily repressed.