Egypt's central bank held its main policy rates steady, including the benchmark overnight deposit rate at 8.25 percent, saying "pronounced downside risks to domestic GDP combined with the persistently negative output gap since 2011 will limit upside risks to the inflation outlook going forward."
The Central Bank of Egypt (CBE), which has held rates steady this year after cutting by 100 basis points in 2013, said downside risks to the global economy from the challenges facing the euro area and softening growth in emerging markets could pose risks to the domestic economy.
Egypt's economy has remained weak since political uprisings in 2011 and in the third quarter of 2013 - the first quarter of the 2013/14 fiscal year - Gross Domestic Product expanded by only 1.04 percent from the same 2012 quarter. It was the seventh quarter in a row with declining growth. In the 2012/13 fiscal year, Egypt's economy grew by 2.1 percent.
The lack of economic growth is leading to high unemployment and in the fourth quarter of 2013 the unemployment rate was steady at 13.4 percent from the third quarter, highs not seen for decades.
The economy was characterized by modest growth in manufacturing and construction while tourism and petroleum sectors declined in the first fiscal quarter.
"Investment levels remained low given the heightened uncertainty that faced market participants since early 2011 and weak credit growth to the private sector," the CBE said.
The CBE said upside risks to inflation had continued to ease as international food prices were unlikely to rise due to recent global developments and it projects inflation will ease in coming months.
Egypt's headline inflation rate declined to 11.4 percent in January from 11.7 percent in December and November's 12.97 percent, a high for 2013 and the highest since February 2009.
Core inflation also eased to 11.7 percent in January from 11.9 percent in December.
Economists had expected the central bank to maintain rates, following a surprise rate cut in December to boost growth.