Emirates NBD Research
 

Find anything about our articles and more.
Enter a query in the search input above, and results will be displayed as you type.

Try typing "Dubai Economics", "Dubai GDP", "GCC Macro"

Emirates NBD
Search
Subscribe
   
  • Home
  • Economics

    Emirates NBD Research provides detailed coverage of 16 GCC and MENA economies, analysing them from a top down macro and strategic perspective as well as by a bottom up sector by sector approach.

    • SUBTOPICS
    • GCC Macro
    • MENA Macro
    • Global Macro
    • Sector Economics
    • Monthly Insights

     

    Latest Article e-commerce: Only warming up
    Latest Article Economic Calendar 12 April
    Latest Article Jordan outlook

     

  • Markets

    Emirates NBD Research publishes reports on global forex, rates and commodities, as well as regional fixed income and equity markets.

    • SUBTOPICS
    • Foreign Exchange
    • Fixed Income
    • Commodities
    • Equities
    • Monthly Insights

     

    Latest Article IEA raises oil demand outlook
    Latest Article Metals markets to benefit from vaccines and stimulus
    Latest Article OPEC surprises again

     

  • Daily
  • PMIs

    Emirates NBD sponsors Purchasing Managers’ Indices for the UAE, Saudi Arabia, Egypt and Dubai. The indices are compiled by IHS Markit, the leading global provider of financial market data.

    • SUBTOPICS
    • UAE PMI
    • Saudi Arabia PMI
    • Egypt PMI
    • Dubai PMI
    • Methodology

     

    Latest Article Dubai PMI: Higher input costs squeeze margins in March
    Latest Article UAE PMI improves in March, but global supply constraints are raising input costs
    Latest Article Dubai PMI rose in February

     

  • About Us
  • EmiratesNBD.com
  • Subscribe
FX > ECONOMICS

EGP yields to coronavirus pressures

Daniel Richards - MENA Economist
Published Date: 04 June 2020

Facebook
Linkedin
Twitter
Email
Print

 

The Egyptian pound has depreciated in earnest in the past two weeks, slipping to EGP 16.07/USD at the time of writing on June 4, having crossed its 100-day moving average the previous day. Previous to this the currency had been on another bout of sideways trading at around EGP 15.75/USD over the nearly two months from March 22 to May 14, even as the coronavirus pandemic took hold both in Egypt and around the world. We had expected that the authorities would prioritise near-term stability and intervene to hold the currency steady for a longer period, but whether it was the rapid run-down seen in reserves, or on the back of prompting by the IMF, the pound has now begun to slip sooner than we anticipated.

EGP/USD depreciates 

Source: Bloomberg, Emirates NBD Research

Given the massive pressures relating to the coronavirus pandemic which are mounting on Egypt, this prompts the question as to whether we are likely to see a similar move lower to that seen in 2016. Then, too, a severe strain on Egypt’s balance of payments prompted the country to enter into a new reform programme with the IMF, just as it is looking to do now. However, the current pressures are not near as intense as they were then, given the positive progress made by Egypt over the course of its recent IMF programme in ironing out many of its previous external imbalances. Further, we would expect a rebound in many of Egypt’s inflows over the next 12 months, barring any disastrous escalation of the coronavirus crisis. As such, we project a much milder depreciation back to EGP 17.00/USD by year-end and to EGP 18.00/USD by end-2021. This is the level around which the currency traded through much of 2017 and 2018, before it began its appreciatory run in January last year.

We had in any case believed that the pound would reach the upper limits of its appreciation around the middle of this year at EGP 15.50/USD (see Egypt Quarterly Q1) before beginning to sell off once more, but the pressures of the pandemic, and its effect on remittances, tourism revenues, Suez Canal revenues and portfolio inflows have brought the end of appreciation sooner than expected. The hot money outflows seen as the attractiveness of local debt has diminished have been somewhat mitigated by a USD 5bn Eurobond issuance last month, and further support from the IMF in the form of a USD 2.8bn rapid financing instrument (RFI) will also have steadied the ship. Nevertheless, maintaining the pound at the EGP 15.75/USD level for much longer would have likely been a drain on reserves, which fell by a record USD 5.4bn in March and a further USD 3.1bn in April.

Reserves remain considerable at around seven months of import cover according to the Central Bank of Egypt. However, intervening to hold the currency firm at those levels for a prolonged period could well have proved counter-productive had it begun to raise questions over the pound’s true value, potentially deterring the portfolio investors upon which the CBE has come to rely. Further, the negotiations around a new standby agreement with the IMF, which will come with far more requisites than the RFI, could see some pressure exerted by the Fund for a more flexible exchange rate regime, prompting further depreciation.

Written By:
Daniel Richards, MENA Economist

RELATED ARTICLES

Joe Biden wins presidential election
08.11.2020

Updates to our Treasury and FX views
31.08.2020

India Monitor - February 2020
06.02.2020

FX Week
21.07.2019

Non-farm payrolls cause a sharp adjustment in U.S. interest rate expectations
09.06.2019

See all

LATEST ARTICLES

IEA raises oil demand outlook
14.04.2021

Morocco outlook
08.04.2021

Metals markets to benefit from vaccines and stimulus
05.04.2021

See all
 

 Subscribe to our newsletter


Never miss out what is going on in UAE Economics

KEEP READING MORE

PMIs: UAE reading disappoints

The UAE headline PMI slipped below the neutral 50 level in October, for the second time in three months, declining to 49.5 from 51.0 in September.

ECONOMICS, PMIS - 03.11.2020

Dollar weakness remains entrenched

Politics, coronavirus and growth all weigh against the dollar in 2021.

MARKETS, FX - 07.01.2021

MENA Quarterly Q3 2020

Our regional MENA roundup for the third quarter

ECONOMICS, MENA MACRO - 19.07.2020

 

CBE keeps rates on hold

The Central Bank of Egypt kept its benchmark overnight deposit rate on hold at 8.25% at its February 4 meeting.

ECONOMICS, EGYPT - 07.02.2021

GCC budget deficits to remain substantial even as economic outlook improves

Oil price will remain below GCC budget break evens in 2021 and sovereigns will need to issue more debt to finance budget shortfalls.

ECONOMICS, GCC MACRO - 17.02.2021

OPEC and allies to keep oil market hot

We now expect oil balances to be tighter and prices to be higher

MARKETS, COMMODITIES - 07.03.2021

Monthly Insights - November 2020

Our final Monthly Insights publication of 2020, looking at the latest developments and trends in global and regional economics and markets.

ECONOMICS, MONTHLY INSIGHTS - 25.11.2020

  • Economics
  • Markets
  • PMIs
  • About Us
  • Subscribe to our publications
  • Economics
  • GCC Macro
  • MENA Macro
  • Global Macro
  • Sector Economics
  • Markets
  • Foreign Exchange
  • Fixed Income
  • Commodities
  • Equities
  • PMIs
  • UAE PMI
  • Saudi Arabia PMI
  • Egypt PMI
  • Dubai Economy Tracker
  • Methodology
  • About Us
  • Subscribe to our publications

 


Terms and Conditions
Copyright © 2021 Emirates NBD Bank PJSC. All Rights Reserved