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Monday, 8 January 2018

Investors optimistic about Egypt’s 2018 prospects, but FDI may not surge until second half

Investors are “increasingly optimistic about prospects” for Egypt in 2018 “after years of political turmoil,” according to Reuters. With foreign holdings of T-bills growing 3x over 2010 levels, foreign investment in the capital market reaching its highest since 2010, and — most importantly — FDI inflows rising, the Egyptian economy is definitely looking like it’s on its way to further stability. The discovery of new natural gas fields, such as Zohr, is also “key for many long-term investors,” the newswire notes, as its expected to help Egypt achieve sufficiency and become an energy hub as it begins to export. “Besides the gas, private equity firms say reforms launched since the end of 2016 that secured a USD 12 bn loan program from the IMF” have “shifted sentiment enough to spur investment, despite the risks.”

Private equity firms are expecting a boom in energy investments, “partly because of the improving outlook for gas supplies and a growing solar power industry.” Other investors are looking at “sectors likely to benefit as the economy expands, and exporters helped by the weaker currency.” Those include education, water, food, healthcare, and other consumer and export-focused industries. “‘We believe sectors related to consumer — retail, real estate, healthcare and education — and export manufacturing industries like textiles, agri-processing, and many other manufactured products are attractive,’” said Iyad Malas, a partner in the Dubai-based private equity outfit Gateway Partners.

Just don’t expect significant inflows of FDI in 1H2018, Pharos Holding head of research Radwa El Swaify tells Reuters. No investor will be willing to inject funds into a country with a presidential elections scheduled, she says, expecting investment to rebound in 2H2018, particularly in 4Q2018. CI Capital economist Noaman Khaled expects 2018 to be a rebound year for investment in Egypt due to the more predictable nature of the FX regime, the interest rates, tax regime, and energy prices. He says this reduced ambiguity compared to previous years makes feasibility studies easier. Khaled expects inflows of USD 7.9 bn during the year. Beltone’s Alia Mamdouh is more optimistic, saying investments could hit USD 10.5 bn, of which 80% are set to go into the energy sector.

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