Networking Business Event

Hosted by the National Bank of Egypt in London, Central Bank of Egypt Deputy Governor Rami Abul Naga shared with the attendees recent updates on the macroeconomic developments and forecasts in Egypt as well as the country’s plans and efforts to navigate these challenging times.

The Egyptian Government has been grappling with the crises and challenges posed on the economy and has managed to mitigate the risks associated with the global dynamics. With the economy’s resilience and diversity and a 2% population growth, the country’s growth rate is expected to record a 4.2% growth in the current fiscal year and 6% growth rate on the medium term. Consumption has also contributed to this growth rate owned to the population demographics, which was foreseen during COVID-19 when the Egyptian economy didn’t contract then and continued to grow. Exports have also recovered notably reaching around USD 6.5 mn in nonoil exports during the past 3 quarters in the current fiscal year, with imports standing at around USD 87 million by May 2023.

To address its core mandate on inflation, the CBE has been running a monitoring stance, moving the interest rates by 1000 basis points during its Monetary Policy Committee meetings, a level that is thought to achieve the CBE’s set inflation targets. In addition, the CBE has also worked on tightening the reserved required ratios at 18% in order to ensure liquidity within the system, besides preserving financial stability by continuing to observe prudence in bank’s practices as well as considering external buffers to absorb external shocks and building international reserves at a safe threshold where they stand at around USD 34.7 billion in May 2023.

In spite of the Egyptian Pound losing its value, the CBE Deputy Governor highlighted that the Government is not concerned with the currency moving to any direction as long as the liquidity is secured; an action that further shows how the Government is working on moving away from the currency being a nominal anchor rather than being a foreign exchange rate. On a separate note, urban inflation was noted to record around 33% in May 2023, but the Central Bank of Egypt (CBE) is working on lowering prices to manageable levels that do not compromise the consumer’s purchasing power. Additionally, the Government has also undertaken some measures to consolidate and improve the fiscal dynamics including revising tobacco prices and subsided food prices. Deputy Governor Rami Abul Naga stressed that the Government is cautious of the adopted measures and would rather not run into an easing cycle that might lead to a volatility in the decision-making process, despite how expectations for inflation rates continue to run high.

Investments in Egypt have usually contributed positively to the growth rates but are not flowing suit. Accordingly, the

Government has been undertaking significant steps that are set to act as drivers to incentivize private investments. Deputy Governor Rami Abul Naga stressed that the challenges facing Egypt were noted to be a confidence issue rather than a current account issue, as the latter has already achieved a surplus of around USD 1.4 billion achieved during Q2 of FY 2022/23, driven mainly by the improvement in the trade balance as well as the services balance which doubled this year. Remittances on the other hand have taken a downturn, but Suez Canal receipts have recorded a USD 2.2 billion in Q3 FY 2022/23 backed by factors such as environmental considerations. Similarly, tourism revenues plummeted post pandemic but have now recovered not only behind the undertaken marketing campaigns but also behind the strategies and plans undertaken by the Egyptian Government. Likewise, FDIs have demonstrated an improvement where around USD 9 billion were recorded in net FDIs during FY 2021/22, led mostly by the services, manufacturing, construction, and agriculture sectors. Despite the ongoing challenges, the Egyptian Government is confident that it would circumvent these crises and continue on its economic reform plans.

Thursday June 15, 2023