Business Today Egypt (BT) July - August 2021

News in Focus
Egypt’s Real Rates Continue To Outperform Peers
Selected Markets – Real Interest Rates, %
Source: Fitch Solutions
from Egyptians living overseas to remain strong
in 2021 and 2022, supported by an economic recovery
in key remitting countries, specifically in
the Gulf Cooperation Council. We also foresee
a gradual rebound in the tourism sector, largely
due to advancement in vaccine rollouts in Europe,
a key source of tourists for Egypt, as well
Egypt’s Real Rates Continue To Outperform Peers
Selected Markets – Real Interest Rates, %
as the resumption of chartered flights with Russia.
In addition, we anticipate that Egypt will receive
about USD2.8bn under the IMF’s initiative
to help member countries meet their financing
needs. Combined, these factors will bolster foreign
currency inflows to Egypt.
That said, we believe that the pound’s appreciation
will be contained, as the CBE continues
to intervene in the forex market in the
short term. The CBE has been active
in building up reserves, with Egypt’s
foreign currency reserves gradually recovering
from USD36.0bn in May 2020
to USD40.6bn in June 2021. While
we continue to believe the CBE will
prevent a stronger appreciation beyond
EGP15.50/USD, a breach of this
level of resistance would likely push
the pound to trade stronger towards
EGP15.25/USD.
Long-Term Outlook (six-to-24 months)
We maintain our view that the pound
will gradually depreciate in the long
term, averaging EGP16.10/USD in
2022 largely on the back of higher inflation.
We forecast inflation will average
6.6% in 2022 (up from an average
Source: CBE, Fitch Solutions of 5.10% in 2021) largely due to strong
domestic demand and increased electricity
prices amid subsidy cuts. In addition,
Egypt’s structural twin deficits and
elevated public debt level will limit the appeal of
24 July-August 2021
www.BusinessTodayEgypt.com