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Middle East

Egypt

Egypt Consumer Prices (Aug.)

Egypt’s headline inflation rate jumped to a near-four-year high of 14.6% y/y in August as the impact of the weaker pound continued to filtered through. Inflation is likely to rise a little further over the rest of this year and with the pound set to be allowed to depreciate at a faster rate too, we think this will prompt a further 150bp of interest rate hikes, to 12.75%.

8 September 2022

Egypt: Amer’s resignation raises scrutiny of pound policy

The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer points to a growing tension within policymaking circles on the best way to address the country’s external imbalances. We think the next governor will ultimately need to let the pound fall further – our forecast is for the currency to fall to 25/$ by end-2024 (from 19.1/$ now) – and hike interest rates.

17 August 2022

Egypt: PIF steps up investment; CBE rate hike on the cards

Saudi Arabia’s Public Investment Fund has stepped up investments into Egypt this week that will help to ease external financing concerns. At the same time, electricity rationing will begin next week to free up more natural gas (which Egypt relies on for power) for export in an effort to narrow the large current account deficit. However, these measures will only provide a short-term reprieve and a weaker pound and steps to attract more direct investment will be key to putting the external position on a more sustainable footing. Meanwhile, rising inflation is likely to prompt the Central Bank of Egypt to resume its tightening cycle with a 50bp hike, to 11.75%, next Thursday.

11 August 2022
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Egypt Consumer Prices (Jul.)

Egypt’s headline inflation rate picked up to a three-year high of 13.6% y/y in July and we think it will remain above the Central Bank of Egypt’s target range until early 2024. Greater flexibility of the pound has taken some pressure off policymakers to hike interest rates aggressively, but we still think rates will rise a further 150bp, to 12.75%, by the end of this year.

Egypt’s prolonged IMF talks, OPEC+ fallout

Egypt’s Finance Minister Mohamed Maait argued this week that any financing agreement with the IMF would be much smaller than the $15bn suggested by some analysts but, if anything, the drawn out nature of the talks, coupled with recent policy reforms, could hint that Egypt does not want IMF funding at all. Elsewhere, the decision by OPEC+ to raise oil output quotas by 100,000bpd on Wednesday underwhelmed many – particularly after President Biden’s trip to Jeddah – and suggests the group is taking a more restrained approach to raising output amid the global economic slowdown.

PMIs (Jul.)

July’s batch of PMIs were a mixed bag, but the readings reinforce our view that activity in non-oil sectors in the Gulf remains strong. Meanwhile, there were further signs that price pressures are easing. EM Drop-In (4th August, 10:00 ET/15:00 BST): Join our monthly online session on the big issues in emerging markets. In this 20-minute briefing, the team will be answering your questions about debt risks amid global tightening, the latest on the inflation outlook and much more. Register now. ​

Egyptian pound has a lot further to fall

Spillovers from the war in Ukraine have caused Egypt’s large current account deficit to widen this year and, with the country struggling to attract stable forms of external financing, officials will need to stick to their shift to a flexible exchange rate in order to restore macroeconomic stability. The result is that we think the pound will need to weaken to around 25/$ (from 18.9/$ now) by the end of 2024. EM Drop-In (4th August, 10:00 ET/15:00 BST): Join our monthly online session on the big issues in emerging markets. In this 20-minute briefing, the team will be answering your questions about debt risks amid global tightening, the latest on the inflation outlook and much more. Register now.

Tunisia’s referendum, Egypt privatisation, MENA Outlook

Tunisians will vote on proposed constitutional amendments on Monday, which could further deter foreign investors and impede progress on an IMF deal, compounding the country's economic problems. Elsewhere, Egypt’s government agreed to list two military-owned companies on the local stock market as part of its renewed privatisation drive. Previous efforts have fallen short of government targets, so it will remain to be seen if this time it turns out to be the real deal.

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