Egypt Quarterly Q4 2019

We anticipate a steady improvement in Egypt’s economic fundamentals, and an ongoing improvement in growth – although with many gains in the base, these improvements will be harder won than those seen over the past several years, and real GDP growth will remain around the 6.0% level for the time being.

We project an ongoing improvement in Egypt’s fiscal situation, forecasting that the budget deficit will be equivalent to 7.3% of GDP in 2019/20, compared to an estimated 8.3% in the year ended in June.

Full-year figures from fiscal 2018/19 indicate that Egypt’s current account deficit widened last year, albeit only modestly, from -2.5% of GDP to -2.7%. Our expectation is that there will be a further enlargement this year, to -2.8% of GDP, and to -3.2% of GDP next year. The rebalancing effects of the 2016 currency depreciation are muted as the pound has strengthened

The Central Bank of Egypt’s MPC has wholeheartedly embarked on its rate-cutting cycle now, following the more tentative interest rate reductions seen in 2018 and at the start of 2019. The bank has cut rates at its last two meetings, and we expect further cuts to come before the end of the year.

The Egyptian pound has continued its strong run against the US dollar, hitting EGP 16.1450/USD at the time of writing on November 3 – levels last seen in March 2017.

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